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What changed in FIRST CAPITAL INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST CAPITAL INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+197 added−169 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-29)

Top changes in FIRST CAPITAL INC's 2024 10-K

197 paragraphs added · 169 removed · 143 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

65 edited+6 added−5 removed228 unchanged
Biggest changeOther Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, including the: ● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; 24 ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; ● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Biggest changeOther Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, including the: ● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; ● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. 24 The operations of the Bank also are subject to laws such as the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and ● Check Clearing for the 21st Century Act (also known as “Check 21”), which gives certain check reproductions, such as digital check images and copies made from that image (a “substitute check”), the same legal standing as the original paper check.
Losses are charged against the ACL when management believes that uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. ACL on Held to Maturity Debt Securities Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type.
Losses are charged against the ACL when management believes that the uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. ACL on Held to Maturity Debt Securities Management measures expected credit losses on held to maturity debt securities on a collective basis by major security type.
The Bank’s lending policies generally limit the maximum loan-to-value ratio on fixed-rate and ARM loans to 80% of the lesser of the appraised value or purchase price of the underlying residential property unless private mortgage insurance to cover the excess over 80% is obtained, in which case the mortgage is limited to 95% (or 97% under a Freddie Mac program) of the lesser of appraised value or purchase price.
The Bank’s lending policies generally limit the maximum loan-to-value (“LTV”) ratio on fixed-rate and ARM loans to 80% of the lesser of the appraised value or purchase price of the underlying residential property unless private mortgage insurance to cover the excess over 80% is obtained, in which case the mortgage is limited to 95% (or 97% under a Freddie Mac program) of the lesser of appraised value or purchase price.
There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional limitations based on the type of loan involved. 23 Enforcement.
There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional limitations based on the type of loan involved. Enforcement.
Civil penalties cover a wide range of violations and can amount to $2 million in especially egregious cases. State nonmember banks are regulated by the FDIC and state regulators. Federal Home Loan Bank System The Bank is a member of the FHLB System, which consists of 11 regional FHLBs and the Office of Finance.
Civil penalties cover a wide range of violations and can amount to $2 million in especially egregious cases. State nonmember banks are regulated by the FDIC and state regulators. 23 Federal Home Loan Bank System The Bank is a member of the FHLB System, which consists of 11 regional FHLBs and the Office of Finance.
The construction loan documents require the disbursement of the loan proceeds in increments as construction progresses. Disbursements are based on periodic on-site inspections by an independent appraiser. 4 Construction lending is inherently riskier than residential mortgage lending. Construction loans, on average, generally have higher loan balances than residential mortgage loans.
The construction loan documents require the disbursement of the loan proceeds in increments as construction progresses. Disbursements are based on periodic on-site inspections by an independent appraiser. Construction lending is inherently riskier than residential mortgage lending. Construction loans, on average, generally have higher loan balances than residential mortgage loans.
Loans are reviewed regularly and when loans become 90 days delinquent, the loan is placed on nonaccrual status and the previously accrued interest income is reversed unless, in the opinion of management, the outstanding interest remains collectible.
Loans are reviewed regularly and when loans become 90 days delinquent, the loan is typically placed on nonaccrual status and the previously accrued interest income is reversed unless, in the opinion of management, the outstanding interest remains collectible.
The held to maturity securities portfolio includes subordinated debt obligations issued by other bank holding companies. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At December 31, 2023, the estimated reserve was immaterial. 12 Deposit Activities and Other Sources of Funds General.
The held to maturity securities portfolio includes subordinated debt obligations issued by other bank holding companies. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At December 31, 2024, the estimated reserve was immaterial. 12 Deposit Activities and Other Sources of Funds General.
However, at December 31, 2023, the Bank had no commitments required to be accounted for at fair value, as all mortgage loan commitments were best efforts commitments where specific loans were committed to be delivered if and when the loans were sold. Fair value is estimated based on fees that would be charged on commitments with similar terms. Delinquencies.
However, at December 31, 2024, the Bank had no commitments required to be accounted for at fair value, as all mortgage loan commitments were best efforts commitments where specific loans were committed to be delivered if and when the loans were sold. Fair value is estimated based on fees that would be charged on commitments with similar terms. Delinquencies.
Such loans are generally originated at fixed interest rates for terms up to five years and at loan-to-value ratios up to 90% of the blue book value in the case of used vehicles and 90% of the purchase price in the case of new vehicles. 5 The Bank originates variable-rate home equity and fixed-rate second mortgage loans generally for terms not to exceed ten years.
Such loans are generally originated at fixed interest rates for terms up to five years and at LTV ratios up to 90% of the blue book value in the case of used vehicles and 90% of the purchase price in the case of new vehicles. 5 The Bank originates variable-rate home equity and fixed-rate second mortgage loans generally for terms not to exceed ten years.
The Bank seeks to minimize these risks by limiting the maximum loan-to-value ratio to 75% and strictly scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. The Bank also obtains loan guarantees from financially capable parties based on a review of personal financial statements. Commercial Business Loans.
The Bank seeks to minimize these risks by limiting the maximum LTV ratio to 75% and strictly scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan. The Bank also obtains loan guarantees from financially capable parties based on a review of personal financial statements. Commercial Business Loans.
The Bank accrues interest on loans over 90 days past due when, in the opinion of management, the estimated value of collateral and collection efforts are deemed sufficient to ensure full recovery. The Bank did not recognize any interest income on nonaccrual loans for the fiscal year ended December 31, 2023.
The Bank accrues interest on loans over 90 days past due when, in the opinion of management, the estimated value of collateral and collection efforts are deemed sufficient to ensure full recovery. The Bank did not recognize any interest income on nonaccrual loans for the fiscal year ended December 31, 2024.
The net income or loss from operations of foreclosed real estate held for sale is reported in noninterest expense. At December 31, 2023, the Bank had no foreclosed real estate. See Note 6 in the accompanying Notes to Consolidated Financial Statements for additional information regarding foreclosed real estate. ACL on Loans.
The net income or loss from operations of foreclosed real estate held for sale is reported in noninterest expense. At December 31, 2024, the Bank had no foreclosed real estate. See Note 6 in the accompanying Notes to Consolidated Financial Statements for additional information regarding foreclosed real estate. ACL on Loans.
The loan-to-value ratio on such loans is limited to 80%, taking into account the outstanding balance on the first mortgage loan. The Bank’s underwriting procedures for consumer loans includes an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loans.
The LTV ratio on such loans is limited to 80%, taking into account the outstanding balance on the first mortgage loan. The Bank’s underwriting procedures for consumer loans includes an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loans.
Therefore, the Company’s independent registered public accounting firm was not required for SEC reporting purposes to attest on internal control over financial reporting as of December 31, 2023. Federal Securities Laws The Company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as amended.
Therefore, the Company’s independent registered public accounting firm was not required for SEC reporting purposes to attest on internal control over financial reporting as of December 31, 2024. Federal Securities Laws The Company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as amended.
The Bank was in compliance with this requirement with an investment in FHLB stock at December 31, 2023 of $1.7 million. The FHLBs were previously required to provide funds for the resolution of insolvent thrifts in the late 1980s and contribute funds for affordable housing programs.
The Bank was in compliance with this requirement with an investment in FHLB stock at December 31, 2024 of $1.7 million. The FHLBs were previously required to provide funds for the resolution of insolvent thrifts in the late 1980s and contribute funds for affordable housing programs.
Federal Reserve System Previously, the Federal Reserve Board regulations required banks to maintain non-interest earning reserves against their transaction accounts (primarily NOW and regular checking accounts). However, effective March 26, 2020, the Federal Reserve Board set reserve requirement ratios to 0.0%, and the requirement remained at 0.0% at December 31, 2023.
Federal Reserve System Previously, the Federal Reserve Board regulations required banks to maintain non-interest earning reserves against their transaction accounts (primarily NOW and regular checking accounts). However, effective March 26, 2020, the Federal Reserve Board set reserve requirement ratios to 0.0%, and the requirement remained at 0.0% at December 31, 2024.
In October 2008, the Federal Reserve Board began paying interest on certain reserve balances. On March 12, 2020, the SEC finalized amendments to the definitions of “accelerated” and “large accelerated filer” definitions. The amendments increase the threshold criteria for meeting these categories and were effective on April 27, 2020.
In October 2008, the Federal Reserve Board began paying interest on certain reserve balances. On March 12, 2020, the SEC finalized amendments to the definitions of “accelerated” and “large accelerated filer” definitions. The amendments increased the threshold criteria for meeting these categories and were effective on April 27, 2020.
The Bank seeks to originate commercial real estate loans at variable interest rates based on the prime lending rate or the United States Treasury Bill rate for terms ranging from ten to 20 years and with interest rate adjustment intervals of one to five years.
The Bank seeks to originate commercial real estate loans at variable interest rates based on the prime lending rate or the United States Treasury Bill rate for terms ranging from ten to 25 years and with interest rate adjustment intervals of one to five years.
Loan Maturity and Repricing The following table sets forth certain information at December 31, 2023 regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity, but does not include potential prepayments.
Loan Maturity and Repricing The following table sets forth certain information at December 31, 2024 regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity, but does not include potential prepayments.
A financial institution that falls below the minimum CBLR generally has a two quarter grace period to get back into compliance as long as it maintains a minimum CBLR of 7% for 2020, 7.5% for 2021 and 8% for 2022 and thereafter.
A financial institution that falls below the minimum CBLR generally has a two quarter grace period to get back into compliance as long as it maintains a minimum CBLR of 7% for 2020, 7.5% for 2021, 8% for 2022 and 9% for 2023 and thereafter.
For the years ended December 31, 2021, 2022 and 2023, the Company was subject to Kentucky Corporate income taxes at a rate of 5.00%. The Company’s Kentucky tax returns have not been audited in the past five years. 26
For the years ended December 31, 2022, 2023 and 2024, the Company was subject to Kentucky Corporate income taxes at a rate of 5.00%. The Company’s Kentucky tax returns have not been audited in the past five years. 26
The Bank generally reviews its deposit mix and pricing weekly. The following table presents the maturity distribution of time deposits that are in excess of the FDIC insurance limit (currently $250,000) as of December 31, 2023.
The Bank generally reviews its deposit mix and pricing weekly. The following table presents the maturity distribution of time deposits that are in excess of the FDIC insurance limit (currently $250,000) as of December 31, 2024.
The loan-to-value ratio, maturity and other provisions of the loans made by the Bank are generally reflected in the policy of making less than the maximum loan permissible under federal regulations, in accordance with established lending practices, market conditions and underwriting standards maintained by the Bank. The Bank requires title, fire and extended insurance coverage on all mortgage loans originated.
The LTV ratio, maturity and other provisions of the loans made by the Bank are generally reflected in the policy of making less than the maximum loan permissible under federal regulations, in accordance with established lending practices, market conditions and underwriting standards maintained by the Bank. The Bank requires title, fire and extended insurance coverage on all mortgage loans originated.
A material downturn in economic conditions would be expected to have a material adverse effect on the credit quality of the construction loan portfolio. Commercial Real Estate Loans. Commercial real estate loans are generally secured by small retail stores, professional office space and, in certain instances, farm properties.
A material downturn in economic conditions would be expected to have a material adverse effect on the credit quality of the construction loan portfolio. Commercial Real Estate Loans. Commercial real estate loans are generally secured by small retail stores, professional office space, warehouses, industrial buildings, and, in certain instances, farm properties.
At December 31, 2023, the Bank had no outstanding federal funds purchased under the lines of credit and the Bank had no borrowings under the lines of credit during 2023. Subsidiary Activities The Bank is a subsidiary and is wholly-owned by the Company.
At December 31, 2024, the Bank had no outstanding federal funds purchased under the lines of credit and the Bank had no borrowings under the lines of credit during 2024. Subsidiary Activities The Bank is a subsidiary and is wholly-owned by the Company.
For the years ended December 31, 2021, 2022 and 2023, Indiana imposed a franchise tax based on a financial institution’s adjusted gross income as defined by statute at rates of 5.50%, 5.00% and 4.90%, respectively. The Indiana franchise tax rate will remain at 4.90% in future years.
For the years ended December 31, 2022, 2023 and 2024, Indiana imposed a franchise tax based on a financial institution’s adjusted gross income as defined by statute at rates of 5.00%, 4.90% and 4.90%, respectively. The Indiana franchise tax rate will remain at 4.90% in future years.
At December 31, At December 31, 2023 2022 Weighted Weighted Fair Amortized Percent of Average Fair Amortized Percent of Average Value Cost Portfolio Yield (1) Value Cost Portfolio Yield (1) (Dollars in thousands) SECURITIES AVAILABLE FOR SALE Debt securities: U.S.
At December 31, At December 31, 2024 2023 Weighted Weighted Fair Amortized Percent of Average Fair Amortized Percent of Average Value Cost Portfolio Yield (1) Value Cost Portfolio Yield (1) (Dollars in thousands) SECURITIES AVAILABLE FOR SALE Debt securities: U.S.
No institution may pay a dividend if in default of the federal deposit insurance assessment. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits.
No institution may pay a dividend if in default of the federal deposit insurance assessment. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC has authority to increase insurance assessments.
On March 12, 2023, the FRB created the Bank Term Funding Program (“BTFP”) to make additional funding available to eligible depository institutions. The BTFP offers loans of up to one year in length to banks, savings associations, credit unions and other depository institutions which pledge collateral, such as U.S. Treasuries, U.S. agency notes and bonds and U.S. agency mortgage-backed securities.
On March 12, 2023, the FRB created the Bank Term Funding Program (“BTFP”) to make additional funding available to eligible depository institutions. The BTFP offered loans of up to one year in length to banks, savings associations, credit unions and other depository institutions that pledge collateral, such as U.S. Treasuries, U.S. agency notes and bonds and U.S. agency mortgage-backed securities.
The Bank had $1.2 million of net deferred loan costs at December 31, 2023. Mortgage Banking Activities. Mortgage loans originated and funded by the Bank and intended for sale in the secondary market are carried at the lower of aggregate cost or market value.
The Bank had $1.1 million of net deferred loan costs at December 31, 2024. Mortgage Banking Activities. Mortgage loans originated and funded by the Bank and intended for sale in the secondary market are carried at the lower of aggregate cost or market value.
At December 31, 2022, the Company's allowance for loan losses totaled $6.8 million, of which $6.2 million related to qualitative factor adjustments. 9 See Notes 1 and 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding management’s methodology for estimating the ACL on loans.
At December 31, 2023, the Company's allowance for loan losses totaled $8.0 million, of which $6.1 million related to qualitative factor adjustments. 9 See Notes 1 and 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding management’s methodology for estimating the ACL on loans.
As an accommodation to its commercial business loan borrowers, the Bank issues standby letters of credit or performance bonds usually in favor of municipalities for whom its borrowers are performing services. At December 31, 2023, the Bank had outstanding letters of credit of $1.9 million. Loan Origination and Other Fees.
As an accommodation to its commercial business loan borrowers, the Bank issues standby letters of credit or performance bonds usually in favor of municipalities for whom its borrowers are performing services. At December 31, 2024, the Bank had outstanding letters of credit of $2.1 million. Loan Origination and Other Fees.
The Bank would have recorded interest income of $112,000 for the year ended December 31, 2023 had nonaccrual loans been current in accordance with their original terms. At December 31, 2023, nonperforming loans totaled $1.8 million, consisting entirely of nonaccrual loans. See Note 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding nonperforming loans. Classified Assets.
The Bank would have recorded interest income of $245,000 for the year ended December 31, 2024 had nonaccrual loans been current in accordance with their original terms. At December 31, 2024, nonperforming loans totaled $4.4 million, consisting entirely of nonaccrual loans. See Note 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding nonperforming loans. Classified Assets.
The regulations also provide for a “special mention” category, described as assets which do not currently expose the institution to sufficient risk to warrant adverse classification, but have potential weaknesses that deserve management’s close attention. At December 31, 2023, the Bank had $1.8 million in doubtful/nonaccrual loans and $1.8 million in substandard loans.
The regulations also provide for a “special mention” category, described as assets which do not currently expose the institution to sufficient risk to warrant adverse classification, but have potential weaknesses that deserve management’s close attention. At December 31, 2024, the Bank had $4.4 million in doubtful/nonaccrual loans and $4.3 million in substandard loans.
A financial institution can elect to be subject to or opt out of the CBLR framework at any time. As a qualified community bank, the Bank has opted into the CBLR framework as of December 31, 2023 and, as of that date, its CBLR was 9.92%, meeting all capital adequacy requirements in effect at that date. Insurance of Deposit Accounts.
A financial institution can elect to be subject to or opt out of the CBLR framework at any time. As a qualified community bank, the Bank has opted into the CBLR framework as of December 31, 2024 and, as of that date, its CBLR was 10.57%, meeting all capital adequacy requirements in effect at that date. Insurance of Deposit Accounts.
The Bank limits the number of speculative construction loans outstanding to any one builder based on the Bank’s assessment of the builder’s capacity to service the debt. Most construction loans are originated with a loan-to-value ratio not to exceed 80% of the appraised estimated value of the completed property.
The Bank limits the number of speculative construction loans outstanding to any one builder based on the Bank’s assessment of the builder’s capacity to service the debt. 4 Most construction loans are originated with an LTV ratio not to exceed 80% of the appraised estimated value of the completed property.
Commercial real estate loans are generally originated with a loan-to-value ratio not to exceed 75% of the appraised value of the property. Property appraisals are performed by independent appraisers approved by the Bank’s board of directors.
Commercial real estate loans are generally originated with an LTV ratio not to exceed 75% of the appraised value of the property. Property appraisals are performed by independent appraisers approved by the Bank’s board of directors.
As of December 31, 2023, all of the Bank’s mortgage-backed securities had fixed rates. The Bank also invests in collateralized mortgage obligations (“CMOs”) issued by Ginnie Mae, Fannie Mae and Freddie Mac, as well as private issuers.
As of December 31, 2024, all of the Bank’s mortgage-backed securities had fixed rates. The Bank also invests in collateralized mortgage obligations (“CMOs”) issued by Ginnie Mae, Fannie Mae and Freddie Mac, and on occasion, private issuers.
At December 31, 2023, the Bank had commitments to originate $535,000 in fixed-rate mortgage loans intended for sale in the secondary market after the loans are closed.
At December 31, 2024, the Bank had commitments to originate $836,000 in fixed-rate mortgage loans intended for sale in the secondary market after the loans are closed.
At December 31, 2023, the Bank had approved speculative construction loans, a construction loan for which there is not a commitment for permanent financing in place at the time the construction loan was originated, with total commitments of $8.6 million and outstanding balances of $5.6 million.
At December 31, 2024, the Bank had approved speculative construction loans, a construction loan for which there is not a commitment for permanent financing in place at the time the construction loan was originated, with total commitments of $5.2 million and outstanding balances of $3.2 million.
Such commitments are made in writing on specified terms and conditions and are honored for up to 60 days from the date of application, depending on the type of transaction. The Bank had outstanding loan commitments of approximately $21.4 million at December 31, 2023.
Such commitments are made in writing on specified terms and conditions and are honored for up to 60 days from the date of application, depending on the type of transaction. The Bank had outstanding loan commitments of approximately $16.5 million at December 31, 2024.
In addition, the Bank identified $7.1 million in loans as special mention loans at December 31, 2023. See Note 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding classified loans.
In addition, the Bank identified $5.5 million in loans as special mention loans at December 31, 2024. See Note 4 in the accompanying Notes to Consolidated Financial Statements for additional information regarding classified loans.
Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness.
Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness.
(“Captive”) is a wholly-owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company, the Bank and the Bank’s subsidiaries, and reinsurance to nine other third party insurance captives, for which insurance may not be currently available or economically feasible in the insurance marketplace.
(“Captive”) was a wholly-owned insurance subsidiary of the Company that provided property and casualty insurance coverage to the Company, the Bank and the Bank’s subsidiaries, and reinsurance to nine other third party insurance captives, for which insurance was not available or economically feasible in the insurance marketplace.
Factors considered by management include, among others, payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. At December 31, 2023, the Company’s specific allocation of the ACL for loans totaled $69,000. At December 31, 2023, the Company's ACL on loans totaled $8.0 million, of which $6.1 million related to qualitative factor adjustments.
Factors considered by management include, among others, payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. At December 31, 2024, the Company’s specific allocation of the ACL for loans totaled $1.3 million. At December 31, 2024, the Company's ACL on loans totaled $9.3 million, of which $6.4 million related to qualitative factor adjustments.
Year Ended December 31, 2023 2022 2021 (In thousands) Beginning balance, prior to adoption of ASC 326 $ 6,772 $ 6,083 $ 6,625 Impact of adopting ASC 326 561 - - Provision for (recapture of) credit losses 1,141 950 (325 ) 8,474 7,033 6,300 Recoveries: 1-4 Family Residential Mortgage 21 5 5 Multifamily Residential - - - Commercial Real Estate - - - 1-4 Family Residential Construction - - - Other Construction, Development and Land - 5 - Home Equity and Second Mortgage 2 2 8 Commercial Business 9 - 33 Consumer and Other 180 232 191 Total recoveries 212 244 237 Charge-offs: 1-4 Family Residential Mortgage 31 48 31 Multifamily Residential - - - Commercial Real Estate - - - 1-4 Family Residential Construction - - - Other Construction, Development and Land - - 14 Home Equity and Second Mortgage 15 - 9 Commercial Business 205 - 23 Consumer and Other 430 457 377 Total charge-offs 681 505 454 Net (charge-offs) recoveries (469 ) (261 ) (217 ) Balance at end of period $ 8,005 $ 6,772 $ 6,083 Ratio of allowance to total loans outstanding at the end of the period 1.29 % 1.25 % 1.25 % Ratio of nonaccrual loans to total loans 0.28 % 0.25 % 0.27 % Allowance as a % of nonperforming loans 457.17 % 454.50 % 458.40 % Ratio of net charge-offs to average loans outstanding during the period: 1-4 Family Residential Mortgage 0.01 % 0.04 % 0.03 % Multifamily Residential 0.00 % 0.00 % 0.00 % Commercial Real Estate 0.00 % 0.00 % 0.00 % 1-4 Family Residential Construction 0.00 % 0.00 % 0.00 % Other Construction, Development and Land 0.00 % -0.01 % 0.04 % Home Equity and Second Mortgage 0.02 % 0.00 % 0.00 % Commercial Business 0.29 % 0.00 % -0.01 % Consumer and Other 0.45 % 0.40 % 0.33 % Total net charge-offs to average loans outstanding during the period 0.08 % 0.05 % 0.04 % 10 ACL on Loans Analysis.
Year Ended December 31, 2024 2023 2022 (In thousands) Beginning balance, prior to adoption of ASC 326 $ 8,005 $ 6,772 $ 6,083 Impact of adopting ASC 326 - 561 - Provision for credit losses 1,449 1,141 950 9,454 8,474 7,033 Recoveries: 1-4 Family Residential Mortgage 29 21 5 Multifamily Residential - - - Commercial Real Estate 1 - - 1-4 Family Residential Construction - - - Other Construction, Development and Land - - 5 Home Equity and Second Mortgage 4 2 2 Commercial Business 2 9 - Consumer and Other 140 180 232 Total recoveries 176 212 244 Charge-offs: 1-4 Family Residential Mortgage 4 31 48 Multifamily Residential - - - Commercial Real Estate - - - 1-4 Family Residential Construction - - - Other Construction, Development and Land - - - Home Equity and Second Mortgage - 15 - Commercial Business - 205 - Consumer and Other 345 430 457 Total charge-offs 349 681 505 Net charge-offs (173 ) (469 ) (261 ) Balance at end of period $ 9,281 $ 8,005 $ 6,772 Ratio of allowance to total loans outstanding at the end of the period 1.45 % 1.29 % 1.25 % Ratio of nonaccrual loans to total loans 0.69 % 0.28 % 0.25 % Allowance as a % of nonperforming loans 211.80 % 457.17 % 454.50 % Ratio of net charge-offs to average loans outstanding during the period: 1-4 Family Residential Mortgage -0.02 % 0.01 % 0.04 % Multifamily Residential 0.00 % 0.00 % 0.00 % Commercial Real Estate 0.00 % 0.00 % 0.00 % 1-4 Family Residential Construction 0.00 % 0.00 % 0.00 % Other Construction, Development and Land 0.00 % 0.00 % -0.01 % Home Equity and Second Mortgage -0.01 % 0.02 % 0.00 % Commercial Business 0.00 % 0.29 % 0.00 % Consumer and Other 0.35 % 0.45 % 0.40 % Total net charge-offs to average loans outstanding during the period 0.03 % 0.08 % 0.05 % 10 ACL on Loans Analysis.
Commercial business loans are generally originated with loan-to-value ratios not exceeding 75%. Aside from lines of credit, commercial business loans are generally originated for terms not to exceed seven years with variable interest rates based on the prime lending rate. Approved credit lines totaled $43.1 million at December 31, 2023, of which $12.7 million was outstanding.
Commercial business loans are generally originated with LTV ratios not exceeding 75%. Aside from lines of credit, commercial business loans are generally originated for terms not to exceed seven years with variable interest rates based on the prime lending rate. Approved credit lines totaled $39.1 million at December 31, 2024, of which $15.2 million was outstanding.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing by the FDIC or the OCC.
Management cannot predict what insurance assessment rates will be in the future. 22 Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing by the FDIC.
At December 31, 2023, discounts from appraised values used in management’s analysis for estimates of changes in market conditions and the condition of the collateral ranged from 23% to 30%, with a weighted average discount of 27%.
At December 31, 2024, discounts from appraised values used in management’s analysis for estimates of changes in market conditions and the condition of the collateral ranged from 10% to 20%, with a weighted average discount of 11%.
The following table sets forth an analysis of the Bank’s ACL on loans for the periods indicated. As previously described, activity for the years ending December 31, 2022 and 2021 have been reclassified to reflect the adoption of ASU 2016-13.
The following table sets forth an analysis of the Bank’s ACL on loans for the periods indicated. As previously described, activity for the year ending December 31, 2022 has been reclassified to reflect the adoption of ASU 2016-13. Allowance for Credit Losses Analysis The following table sets forth an analysis of the Bank's ACL on loans for the periods indicated.
At December 31, 2023 2022 Amount Percent of Outstanding Loans in Category Amount Percent of Outstanding Loans in Category (Dollars in thousands) 1-4 Family Residential Mortgage $ 1,490 21.49 % $ 1,036 20.64 % Multifamily Residential 332 6.44 % 346 6.92 % Commercial Real Estate 2,119 27.16 % 2,029 28.63 % 1-4 Family Residential Construction 208 2.52 % 206 2.94 % Other Construction, Development and Land 804 12.35 % 587 8.45 % Home Equity and Second Mortgage 406 9.99 % 531 10.27 % Commercial Business 1,431 10.98 % 1,156 12.08 % Consumer and Other 1,215 9.07 % 881 10.07 % Total allowance for credit losses $ 8,005 100.00 % $ 6,772 100.00 % Investment Activities As an Indiana chartered commercial bank, the Bank has the authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various federal agencies and of state and municipal governments, deposits at the applicable FHLB, certificates of deposit of federally insured institutions, certain bankers’ acceptances and federal funds.
At December 31, 2024 2023 Amount Percent of Outstanding Loans in Category Amount Percent of Outstanding Loans in Category (Dollars in thousands) 1-4 Family Residential Mortgage $ 1,592 21.73 % $ 1,490 21.49 % Multifamily Residential 545 5.77 % 332 6.44 % Commercial Real Estate 2,459 28.91 % 2,119 27.16 % 1-4 Family Residential Construction 184 2.38 % 208 2.52 % Other Construction, Development and Land 588 11.86 % 804 12.35 % Home Equity and Second Mortgage 478 10.41 % 406 9.99 % Commercial Business 2,424 9.81 % 1,431 10.98 % Consumer and Other 1,011 9.13 % 1,215 9.07 % Total allowance for credit losses $ 9,281 100.00 % $ 8,005 100.00 % Investment Activities As an Indiana chartered commercial bank, the Bank has the authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various federal agencies and of state and municipal governments, deposits at the applicable FHLB, certificates of deposit of federally insured institutions, certain bankers’ acceptances and federal funds.
The FHLB functions as a central reserve bank providing credit for member financial institutions. As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its mortgage loans provided certain standards related to creditworthiness have been met.
As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its mortgage loans provided certain standards related to creditworthiness have been met. Advances are made pursuant to several different programs.
A collective bargaining unit does not represent the employees and the Bank considers its relationship with its employees to be good. 14 We regularly solicit feedback from our employees to gain a better understanding of why they may enjoy working at the Bank and what areas of improvement there may be.
We regularly solicit feedback from our employees to gain a better understanding of why they may enjoy working at the Bank and what areas of improvement there may be.
On April 10, 2023, the IRS issued IR-2023-74 and proposed regulations that may result in the Captive being considered a listed transaction. The proposed regulations include the possibility of material tax expense to the consolidated group if finalized in their current form. The Captive was formally dissolved with all remaining assets transferred to the Company in December 31, 2023.
On April 10, 2023, the IRS issued IR-2023-74 and proposed regulations that may have resulted in the Captive being considered a listed transaction. The proposed regulations included the possibility of material tax expense to the consolidated group if finalized in their current form.
The Bank relies upon advances from the FHLB and other sources to supplement its supply of lendable funds and to meet deposit withdrawal requirements. Advances from the FHLB are secured by certain investment securities and first mortgage loans. The Bank also uses retail repurchase agreements as a source of borrowings.
The Bank relies upon advances from the FHLB and other sources to supplement its supply of lendable funds and to meet deposit withdrawal requirements. Advances from the FHLB are secured by certain investment securities and first mortgage loans. The FHLB functions as a central reserve bank providing credit for member financial institutions.
Maturity Period Balance (In thousands) Three months or less $ 14,578 Three through six months 10,556 Six through twelve months 2,942 Over twelve months 1,852 Total $ 29,928 Uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000), were approximately $319.5 million and $393.7 million at December 31, 2023 and 2022, respectively.
Maturity Period Balance (In thousands) Three months or less $ 16,246 Three through six months 20,296 Six through twelve months 4,366 Over twelve months 1,901 Total $ 42,809 Uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000), were approximately $331.4 million and $319.5 million at December 31, 2024 and 2023, respectively.
The rule change expands the definition of “smaller reporting companies” to include entities with public float of less than $700 million and less than $100 million in annual revenues in its most recent fiscal year. The Company met this expanded category of smaller reporting company based on the 2019 fiscal year and is no longer considered an accelerated filer.
The rule change expands the definition of “smaller reporting companies” to include entities with public float of less than $700 million and less than $100 million in annual revenues in its most recent fiscal year.
Treasury notes and bonds: Due in one year or less 42,157 43,046 9.05 % 1.29 % 16,835 17,394 3.38 % 0.88 % Due after one year through five years 20,927 21,712 4.57 % 1.88 % 61,897 65,252 12.68 % 1.50 % Due after five years through ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Due after ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Mortgage-backed securities and CMOs (3) Due in one year or less 28 29 0.01 % 1.11 % 23 23 0.01 % 1.35 % Due after one year through five years 6,608 7,066 1.49 % 1.60 % 6,217 6,618 1.29 % 1.62 % Due after five years through ten years 12,215 13,181 2.77 % 1.70 % 19,034 20,767 4.04 % 1.64 % Due after ten years 78,366 86,292 18.15 % 2.66 % 67,942 77,330 15.03 % 1.77 % Municipal obligations Due in one year or less 2,529 2,533 0.53 % 3.52 % 1,320 1,323 0.26 % 3.13 % Due after one year through five years 25,065 26,071 5.48 % 2.54 % 20,422 21,272 4.13 % 2.54 % Due after five years through ten years 37,334 39,483 8.30 % 2.86 % 38,386 41,165 8.00 % 2.83 % Due after ten years 82,537 90,962 19.13 % 2.80 % 90,762 105,179 20.44 % 2.93 % $ 437,271 $ 468,549 98.53 % $ 460,819 $ 507,466 98.64 % SECURITIES HELD TO MATURITY (2) Corporate notes: Due in one year or less $ - $ - 0.00 % 0.00 % $ - $ - 0.00 % 0.00 % Due after one year through five years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Due after five years through ten years 1,279 2,000 0.42 % 3.28 % 1,507 2,000 0.39 % 3.25 % Due after ten years 3,167 5,000 1.05 % 3.92 % 3,804 5,000 0.97 % 3.92 % $ 4,446 $ 7,000 1.47 % $ 5,311 $ 7,000 1.36 % (1) Yields are calculated on a fully taxable equivalent basis using a marginal federal income tax rate of 21%.
Treasury notes and bonds: Due in one year or less 18,772 18,940 4.45 % 1.72 % 42,157 43,046 9.05 % 1.29 % Due after one year through five years 2,777 2,864 0.67 % 2.92 % 20,927 21,712 4.57 % 1.88 % Due after five years through ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Due after ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Mortgage-backed securities and CMOs (3) Due in one year or less 90 91 0.02 % 0.98 % 28 29 0.01 % 1.11 % Due after one year through five years 5,048 5,245 1.23 % 1.58 % 6,608 7,066 1.49 % 1.60 % Due after five years through ten years 8,625 9,304 2.18 % 1.69 % 12,215 13,181 2.77 % 1.70 % Due after ten years 101,696 109,476 25.71 % 3.48 % 78,366 86,292 18.15 % 2.66 % Municipal obligations Due in one year or less 1,626 1,617 0.38 % 3.94 % 2,529 2,533 0.53 % 3.52 % Due after one year through five years 24,840 26,118 6.13 % 2.08 % 25,065 26,071 5.48 % 2.54 % Due after five years through ten years 50,011 56,033 13.16 % 2.70 % 37,334 39,483 8.30 % 2.86 % Due after ten years 57,678 66,413 15.59 % 2.71 % 82,537 90,962 19.13 % 2.80 % $ 389,243 $ 418,935 98.36 % $ 437,271 $ 468,549 98.53 % SECURITIES HELD TO MATURITY (2) Corporate notes: Due in one year or less $ - $ - 0.00 % 0.00 % $ - $ - 0.00 % 0.00 % Due after one year through five years - - 0.00 % 0.00 % - - 0.00 % 0.00 % Due after five years through ten years 1,324 2,000 0.47 % 3.25 % 1,279 2,000 0.42 % 3.28 % Due after ten years 3,267 5,000 1.17 % 3.92 % 3,167 5,000 1.05 % 3.92 % $ 4,591 $ 7,000 1.64 % $ 4,446 $ 7,000 1.47 % _______________________________________ (1) Yields are calculated on a fully taxable equivalent basis using a marginal federal income tax rate of 21%.
Agency notes and bonds: Due in one year or less $ 16,110 $ 16,363 3.44 % 2.33 % $ 17,702 $ 18,022 3.50 % 1.92 % Due after one year through five years 110,124 118,563 24.93 % 0.92 % 119,578 132,373 25.73 % 1.04 % Due after five years through ten years 3,271 3,248 0.68 % 4.92 % 701 748 0.15 % 3.16 % Due after ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % U.S.
Agency notes and bonds: Due in one year or less $ 44,604 $ 45,650 10.72 % 0.77 % $ 16,110 $ 16,363 3.44 % 2.33 % Due after one year through five years 69,986 73,658 17.29 % 1.04 % 110,124 118,563 24.93 % 0.92 % Due after five years through ten years 3,490 3,526 0.83 % 4.76 % 3,271 3,248 0.68 % 4.92 % Due after ten years - - 0.00 % 0.00 % - - 0.00 % 0.00 % U.S.
See Note 10 in the accompanying Notes to Consolidated Financial Statements for additional information regarding the Bank’s utilization of borrowed funds during the year ended December 31, 2023.
The Bank utilized both advances from the FHLB and borrowings under the BTFP throughout the year ended December 31, 2024. The Bank had no outstanding borrowings at December 31, 2024. See Note 10 in the accompanying Notes to Consolidated Financial Statements for additional information regarding the Bank’s utilization of borrowed funds during the year ended December 31, 2024.
At December 31, 2023 2022 Percent Percent of Increase of Increase Amount Total (Decrease) Amount Total (Decrease) (Dollars in thousands) Non-interest bearing demand $ 205,534 20.04 % $ (49,308 ) $ 254,842 24.02 % $ 12,157 NOW accounts 391,233 38.16 % (3,192 ) 394,425 37.20 % 1,750 Savings accounts 237,542 23.17 % (42,395 ) 279,937 26.40 % 11,169 Money market accounts 65,315 6.37 % (16,021 ) 81,336 7.67 % 7,555 Fixed rate time deposits which mature: Within one year 110,686 10.80 % 84,398 26,288 2.48 % (6,887 ) After one year, but within three years 12,467 1.22 % (3,610 ) 16,077 1.52 % (2,830 ) After three years, but within five years 2,434 0.24 % (5,057 ) 7,491 0.71 % 1,920 After five years - 0.00 % - - 0.00 % - Total $ 1,025,211 100.00 % $ (35,185 ) $ 1,060,396 100.00 % $ 24,834 13 Borrowings.
At December 31, 2024 2023 Percent Percent of Increase of Increase Amount Total (Decrease) Amount Total (Decrease) (Dollars in thousands) Non-interest bearing demand $ 197,993 18.57 % $ (7,541 ) $ 205,534 20.04 % $ (49,308 ) NOW accounts 377,137 35.36 % (14,096 ) 391,233 38.16 % (3,192 ) Savings accounts 222,635 20.88 % (14,907 ) 237,542 23.17 % (42,395 ) Money market accounts 68,794 6.45 % 3,479 65,315 6.37 % (16,021 ) Fixed rate time deposits which mature: Within one year 188,235 17.65 % 77,549 110,686 10.80 % 84,398 After one year, but within three years 9,746 0.91 % (2,721 ) 12,467 1.22 % (3,610 ) After three years, but within five years 1,899 0.18 % (535 ) 2,434 0.24 % (5,057 ) After five years - 0.00 % - - 0.00 % - Total $ 1,066,439 100.00 % $ 41,228 $ 1,025,211 100.00 % $ (35,185 ) 13 Borrowings.
The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity. 22 The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.
A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.
Floating or Fixed Adjustable Rates Rates (In thousands) 1-4 Family Residential Mortgage $ 50,135 $ 79,238 Multifamily Residential 12,811 25,190 Commercial Real Estate 50,774 106,639 1-4 Family Residential Construction - 1,026 Other Construction, Development and Land 37,647 32,361 Home Equity and Second Mortgage 9,873 49,194 Commercial Business 43,425 7,182 Consumer and Other 35,168 5,023 Total Gross Loans $ 239,833 $ 305,853 6 Loan Solicitation and Processing.
Floating or Fixed Adjustable Rates Rates (In thousands) 1-4 Family Residential Mortgage $ 53,940 $ 81,034 Multifamily Residential 10,142 24,902 Commercial Real Estate 55,788 121,393 1-4 Family Residential Construction - 1,040 Other Construction, Development and Land 38,232 27,007 Home Equity and Second Mortgage 9,335 54,234 Commercial Business 37,768 6,227 Consumer and Other 37,677 4,747 Total Gross Loans $ 242,882 $ 320,584 6 Loan Solicitation and Processing.
The collateral is valued at par, and advances under this program do not include any fees or prepayment penalties. The Bank utilized both advances from the FHLB and borrowings under the BTFP throughout the year ended December 31, 2023.
The collateral was valued at par, and advances under this program did not include any fees or prepayment penalties. Effective March 11, 2024, the BTFP ceased making new loans. The Bank also has access to the FRB’s Discount Window for borrowings. The Bank has pledged certain U.S.
Removed
After After One Year 5 Years Within Through Through After One Year 5 Years 15 Years 15 Years Total (In thousands) 1-4 Family Residential Mortgage $ 4,107 $ 18,891 $ 69,483 $ 40,999 $ 133,480 Multifamily Residential 1,962 8,886 29,115 - 39,963 Commercial Real Estate 11,344 50,914 86,457 20,042 168,757 1-4 Family Residential Construction 14,641 - - 1,026 15,667 Other Construction, Development and Land 6,705 37,534 22,449 10,025 76,713 Home Equity and Second Mortgage 3,003 4,911 9,977 44,179 62,070 Commercial Business 17,616 37,029 9,748 3,830 68,223 Consumer and Other 16,182 35,929 4,262 - 56,373 Total Gross Loans $ 75,560 $ 194,094 $ 231,491 $ 120,101 $ 621,246 The following table sets forth the dollar amount of all loans due after December 31, 2024, which have fixed interest rates and have floating or adjustable interest rates.
Added
After After One Year 5 Years Within Through Through After One Year 5 Years 15 Years 15 Years Total (In thousands) 1-4 Family Residential Mortgage $ 3,962 $ 18,333 $ 69,550 $ 47,091 $ 138,936 Multifamily Residential 1,778 7,936 27,108 - 36,822 Commercial Real Estate 7,670 60,826 85,785 30,570 184,851 1-4 Family Residential Construction 14,205 628 - 412 15,245 Other Construction, Development and Land 10,601 43,277 16,062 5,900 75,840 Home Equity and Second Mortgage 2,980 5,447 8,883 49,239 66,549 Commercial Business 18,732 32,005 8,765 3,225 62,727 Consumer and Other 15,982 35,836 6,588 - 58,406 Total Gross Loans $ 75,910 $ 204,288 $ 222,741 $ 136,437 $ 639,376 The following table sets forth the dollar amount of all loans due after December 31, 2025, which have fixed interest rates and have floating or adjustable interest rates.
Removed
The Bank had $21.5 million in borrowings outstanding under the BTFP at an interest rate of 4.89% with a remaining term less than 12 months at December 31, 2023. The Bank had no outstanding advances from the FHLB at December 31, 2023. The Bank had no borrowed funds as of or at the year ended December 31, 2022.
Added
Values for collateral dependent loans not collateralized by real estate are generally based on recent auction results, recent public and private sales, or expert opinions for similar collateral.
Removed
Human Capital As of December 31, 2023, the Bank had 177 full-time employees and 35 part-time employees.
Added
Treasuries and U.S. agency notes and bonds to secure borrowings through the Discount Window, if needed. While the Bank has conducted a test borrowing through the Discount Window, at December 31, 2024, there were no borrowings outstanding through the Discount Window.
Removed
Management cannot predict what insurance assessment rates will be in the future.
Added
On February 28, 2024, the Bank entered into an Overdraft Line of Credit Agreement with the FHLB which established a line of credit not to exceed $10.0 million secured under a blanket collateral agreement. This agreement expires on February 28, 2025. At December 31, 2024, there were no borrowings under the agreement.
Removed
The operations of the Bank also are subject to laws such as the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and ● Check Clearing for the 21st Century Act (also known as “Check 21”), which gives certain check reproductions, such as digital check images and copies made from that image (a “substitute check”), the same legal standing as the original paper check.
Added
The Captive was formally dissolved with all remaining assets transferred to the Company on December 31, 2023. 14 Human Capital As of December 31, 2024, the Bank had 173 full-time employees and 39 part-time employees. A collective bargaining unit does not represent the employees and the Bank considers its relationship with its employees to be good.
Added
The Company has met this expanded category of smaller reporting company at every fiscal year end since 2019 and is no longer considered an accelerated filer.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRecently, there have been market indicators of a pronounced rise in inflation and the FRB has raised certain benchmark interest rates in an effort to combat inflation. As inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.
Biggest changeAs inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses.
In addition, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios. Our ACL on loans and unfunded commitments at any particular date may not be sufficient to cover future loan losses.
In addition, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined LTV ratios. Our ACL on loans and unfunded commitments at any particular date may not be sufficient to cover future loan losses.
Business – Lending Activities – Commercial Real Estate Loans .” Non-performing assets take significant time to resolve, adversely affect our results of operations and financial condition, and could result in losses. At December 31, 2023, our non-performing assets, consisting entirely of non-performing loans, totaled $1.8 million, or 0.28% of our gross loans and 0.15% of our total assets.
Business – Lending Activities – Commercial Real Estate Loans .” Non-performing assets take significant time to resolve, adversely affect our results of operations and financial condition, and could result in losses. At December 31, 2024, our non-performing assets, consisting entirely of non-performing loans, totaled $4.4 million, or 0.69% of our gross loans and 0.37% of our total assets.
We may be required to increase our ACL on loans and unfunded commitments, thus reducing earnings. 27 Commercial business lending may expose the Company to increased lending risks. At December 31, 2023, the Bank’s commercial business loan portfolio amounted to $68.2 million, or 11.0% of total loans.
We may be required to increase our ACL on loans and unfunded commitments, thus reducing earnings. 27 Commercial business lending may expose the Company to increased lending risks. At December 31, 2024, the Bank’s commercial business loan portfolio amounted to $62.7 million, or 9.8% of total loans.
Business – Lending Activities – Commercial Business Loans .” Commercial real estate lending may expose the Company to increased lending risks. At December 31, 2023, the Bank’s commercial real estate loan portfolio amounted to $168.8 million, or 27.2% of total loans. Commercial real estate lending is inherently riskier than residential mortgage lending.
Business – Lending Activities – Commercial Business Loans .” Commercial real estate lending may expose the Company to increased lending risks. At December 31, 2024, the Bank’s commercial real estate loan portfolio amounted to $184.9 million, or 28.9% of total loans. Commercial real estate lending is inherently riskier than residential mortgage lending.
At December 31, 2023, $302.0 million, or 48.6% of the Bank’s total loans receivable, had fixed interest rates all of which were held for investment. The Bank offers ARM loans and fixed-rate loans.
At December 31, 2024, $289.5 million, or 45.3% of the Bank’s total loans receivable, had fixed interest rates all of which were held for investment. The Bank offers ARM loans and fixed-rate loans.
Removed
In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company uses an Agility Preparedness Plan (“Agility Plan”), along with incident response policies, to enable management to respond timely to cybersecurity incidents, coordinate such responses within the Company and with our Board of Directors, notify law enforcement, regulatory bodies, and other government agencies, and notify customers and employees.
Biggest changeThe Company uses a Disaster Recovery Plan (the “Plan”), along with incident response policies, to enable management to respond timely to cybersecurity incidents, coordinate such responses within the Company and with our Board of Directors, notify law enforcement, regulatory bodies, and other government agencies, and notify customers and employees.
These updates include updates on the Company’s cyber risks and threats, the status of projects to strengthen our information security systems, assessments of the information security program, and the emerging threat landscape. Cybersecurity incidents are managed through the Agility Plan, and other appropriate response policies, which provide direction to management allowing for the timely transfer of information throughout the organization.
These updates include updates on the Company’s cyber risks and threats, the status of projects to strengthen our information security systems, assessments of the information security program, and the emerging threat landscape. Cybersecurity incidents are managed through the Plan, and other appropriate response policies, which provide direction to management allowing for the timely transfer of information throughout the organization.
The Agility Plan provides a documented framework for identifying and responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the Crisis Management Team (“CMT”). The CMT facilitates coordination across key stakeholders of the Company. The Company’s CIO and key members of management are members of the CMT.
The Plan provides a documented framework for identifying and responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the Crisis Management Team (“CMT”). The CMT facilitates coordination across key stakeholders of the Company. The Company’s CIO and key members of management are members of the CMT.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBuckman Street Shepherdsville, Kentucky 40165 1962 242 Owned 3,840 550 John Harper Highway Shepherdsville, Kentucky 40165 1999 1,430 Owned 6,648 100 S. Bardstown Road Mount Washington, Kentucky 40047 1991 925 Owned 5,169 140 S. Poplar Street Lebanon Junction, Kentucky 40150 1973 142 Owned 2,795 (1) Represents the net value of land, buildings, furniture, fixtures and equipment owned by the Bank.
Biggest changeBuckman Street Shepherdsville, Kentucky 40165 1962 248 Owned 3,840 550 John Harper Highway Shepherdsville, Kentucky 40165 1999 1,497 Owned 6,648 100 S. Bardstown Road Mount Washington, Kentucky 40047 1991 868 Owned 5,169 140 S.
ITEM 2. PROPERTIES The following table sets forth certain information regarding the Bank’s offices as of December 31, 2023.
ITEM 2. PROPERTIES The following table sets forth certain information regarding the Bank’s offices as of December 31, 2024.
Approximate Year Net Book Owned/ Square Location Opened Value (1) Leased Footage (Dollars in thousands) Main Office: 220 Federal Drive, NW Corydon, Indiana 47112 1997 1,356 Owned 12,000 Branch Offices: 391 Old Capital Plaza, NE Corydon, Indiana 47112 1997 64 Leased (2) 425 8095 State Highway 135, NW New Salisbury, Indiana 47161 1999 399 Owned 3,500 710 Main Street Palmyra, Indiana 47164 1991 671 Owned 6,000 9849 Highway 150 Greenville, Indiana 47124 1986 207 Owned 2,484 5100 State Road 64 Georgetown, Indiana 47122 2008 948 Owned 4,988 4303 Charlestown Crossing New Albany, Indiana 47150 1999 639 Owned 3,500 3131 Grant Line Road New Albany, Indiana 47150 2003 1,198 Owned 12,200 5609 Williamsburg Station Road Floyds Knobs, Indiana 47119 2003 491 Owned 4,160 2744 Allison Lane Jeffersonville, Indiana 47130 2003 911 Owned 4,090 1312 S.
Approximate Year Net Book Owned/ Square Location Opened Value (1) Leased Footage (Dollars in thousands) Main Office: 220 Federal Drive, NW Corydon, Indiana 47112 1997 1,280 Owned 12,000 Branch Offices: 391 Old Capital Plaza, NE Corydon, Indiana 47112 1997 62 Leased (2) 425 8095 State Highway 135, NW New Salisbury, Indiana 47161 1999 386 Owned 3,500 710 Main Street Palmyra, Indiana 47164 1991 609 Owned 6,000 9849 Highway 150 Greenville, Indiana 47124 1986 214 Owned 2,484 5100 State Road 64 Georgetown, Indiana 47122 2008 914 Owned 4,988 4303 Charlestown Crossing New Albany, Indiana 47150 1999 651 Owned 3,500 3131 Grant Line Road New Albany, Indiana 47150 2003 1,193 Owned 12,200 5609 Williamsburg Station Road Floyds Knobs, Indiana 47119 2003 516 Owned 4,160 2744 Allison Lane Jeffersonville, Indiana 47130 2003 926 Owned 4,090 1312 S.
Jackson Street Salem, Indiana 47167 2007 662 Owned 3,400 2420 Barron Avenue, NW Lanesville, Indiana 47136 2010 623 Owned 1,450 7735 Highway 62 Charlestown, Indiana 47111 2017 1,347 Owned 2,500 1612 Highway 44 East Shepherdsville, Kentucky 40165 1980 2,158 Owned 11,892 130 S.
Jackson Street Salem, Indiana 47167 2007 703 Owned 3,400 2420 Barron Avenue, NW Lanesville, Indiana 47136 2010 631 Owned 1,450 7735 Highway 62 Charlestown, Indiana 47111 2017 1,305 Owned 2,500 1612 Highway 44 East Shepherdsville, Kentucky 40165 1980 2,037 Owned 11,892 130 S.
Added
Poplar Street Lebanon Junction, Kentucky 40150 1973 139 Owned 2,795 _______________________________________________________ (1) Represents the net value of land, buildings, furniture, fixtures and equipment owned by the Bank. (2) Lease expires in April 2025. 38

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2023, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. From time to time, the Bank is involved in legal proceedings occurring in the ordinary course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2024, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. From time to time, the Bank is involved in legal proceedings occurring in the ordinary course of business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+30 added−0 removed1 unchanged
Biggest changeFinancial Statements and Supplementary Data 55 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 56
Biggest changeFinancial Statements and Supplementary Data 55 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 56 Item 9B. Other Information 56 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 56 Part III Item 10. Directors, Executive Officers and Corporate Governance 57 Item 11. Executive Compensation 57 Item 12.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 57 Item 13. Certain Relationships and Related Transactions, and Director Independence 58 Item 14. Principal Accounting Fees and Services 58 Part IV Item 15. Exhibits and Financial Statement Schedules 59 Item 16.
Added
Form 10-K Summary 61 SIGNATURES i This Annual Report on Form 10-K contains certain “ forward-looking statements ” within the meaning of the Private Securities Litigation Reform Act of 1995. First Capital, Inc. also may make forward-looking statements in its other documents filed or furnished with the Securities and Exchange Commission ( “ SEC ” ).
Added
In addition, First Capital, Inc. ’ s senior management may make forward-looking statements orally to investors and others. These statements are not historical facts, rather statements based on First Capital, Inc. ’ s current expectations regarding its business strategies, intended results and future performance.
Added
Forward-looking statements are preceded by terms such as “ could, ” “ should, ” “ will, ” “ expects, ” “ believes, ” “ anticipates, ” “ intends ” and similar expressions. Forward-looking statements are not guarantees of future performance. Management ’ s ability to predict results or the effect of future plans or strategies is inherently uncertain.
Added
Numerous risks and uncertainties could cause or contribute to First Capital, Inc. ’ s actual results, performance and achievements being materially different from those expressed or implied by the forward-looking statements.
Added
Factors that may cause or contribute to these differences include, without limitation, the ability of First Capital, Inc. to execute its business plan; First Capital, Inc. ’ s ability to control costs and expenses; competitive products and pricing; deposit flows; loan delinquency rates; changes in federal and state legislation and regulation; and other factors disclosed periodically in First Capital, Inc. ’ s filings with the SEC.
Added
Additional factors that may affect our results are discussed in Item 1A to this Annual Report on Form 10-K titled “ Risk Factors ” below.
Added
These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements, whether included in this report or made elsewhere from time to time by First Capital, Inc. or on its behalf.
Added
Any forward-looking statements made by or on behalf of First Capital, Inc. speak only as of the date they are made, and except to the extent required by applicable law First Capital, Inc. does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.
Added
The reader should, however, consult any further disclosures of a forward-looking nature First Capital, Inc. may make in any subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, or Current Reports on Form 8-K. PART I ITEM 1. BUSINESS General First Capital, Inc. (the “Company” or “First Capital”) was incorporated under Indiana law on September 11, 1998.
Added
On December 31, 1998, the Company became the holding company for First Federal Bank, A Federal Savings Bank (the “Bank”) upon the Bank’s reorganization as a wholly owned subsidiary of the Company resulting from the conversion of First Capital, Inc., M.H.C. (the “MHC”), from a federal mutual holding company to a stock holding company.
Added
On January 12, 2000, the Company completed a merger of equals with HCB Bancorp, the former holding company for Harrison County Bank, and the Bank changed its name to First Harrison Bank. On March 20, 2003, the Company acquired Hometown Bancshares, Inc. (“Hometown”), a bank holding company located in New Albany, Indiana.
Added
On December 4, 2015, the Company acquired Peoples Bancorp, Inc. of Bullitt County and its wholly-owned bank subsidiary, Peoples Bank of Bullitt County (“Peoples”), headquartered in Shepherdsville, Kentucky.
Added
On September 20, 2017, the Bank filed applications with the Indiana Department of Financial Institutions (“IDFI”) and the Federal Deposit Insurance Corporation (“FDIC”) to convert from a federal savings association into an Indiana chartered commercial bank (the “Conversion”), and since June 30, 2018, the IDFI is the Bank’s primary regulator and the FDIC is the Bank’s primary federal regulator.
Added
The Conversion did not affect the Bank’s clients in any way and did not affect FDIC deposit insurance on eligible accounts as the Bank’s deposits are federally insured by the FDIC under the Deposit Insurance Fund. The Bank is a member of the Federal Home Loan Bank (“FHLB”) System.
Added
Additionally, in connection with the Conversion, the Company filed an application with the Federal Reserve Bank (“FRB”) of St. Louis to change from a savings and loan holding company to a financial holding company. This change occurred simultaneously with the Conversion discussed above. The Company’s primary business activity is the ownership of the outstanding common stock of the Bank.
Added
Management of the Company and the Bank are substantially similar and the Company neither owns nor leases any property, but instead uses the premises, equipment and furniture of the Bank in accordance with applicable regulations. 2 Availability of Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on the Company’s Internet website, www.firstharrison.com, as soon as practicable after the Company electronically files such material with, or furnishes it to, the SEC.
Added
The contents of the Company’s website shall not be incorporated by reference into this Form 10-K or into any reports the Company files with or furnishes to the Securities and Exchange Commission. Market Area and Competition The Bank considers Harrison, Floyd, Clark and Washington counties in Indiana and Bullitt County in Kentucky its primary market area.
Added
All of its offices are located in these five counties, which results in most of the Bank’s loans being made in these five counties. The main office of the Bank is located in Corydon, Indiana, 35 miles west of Louisville, Kentucky. The Bank aggressively competes for business with local banks, as well as large regional banks.
Added
Its most direct competition for deposit and loan business comes from the commercial banks operating in these five counties. Based on data published by the FDIC, the Bank is the leader in FDIC-insured institutions in deposit market share in Harrison County, Indiana, which includes the Bank’s main office, and in Bullitt County, Kentucky, where Peoples was headquartered. Lending Activities General.
Added
The Bank has transformed the composition of its balance sheet from that of a traditional thrift institution to that of a commercial bank. On the asset side, this was accomplished in part by selling in the secondary market the newly-originated qualified fixed-rate residential mortgage loans while retaining variable rate residential mortgage loans in the portfolio.
Added
This transformation was also enhanced by expanding commercial lending staff dedicated to growing commercial real estate and commercial business loans. The Bank also originates consumer loans and residential construction loans for the loan portfolio. The Bank does not offer, and has not offered, Alt-A, sub-prime or no-document mortgage loans. Loan Portfolio Analysis.
Added
The following table presents the composition of the Bank’s loan portfolio by type of loan at the dates indicated.
Added
At December 31, 2024 2023 Amount Percent Amount Percent (Dollars in thousands) Mortgage Loans: 1-4 Family Residential Mortgage $ 138,936 21.73 % $ 133,480 21.49 % Multifamily Residential 36,822 5.77 % 39,963 6.44 % Commercial Real Estate 184,851 28.91 % 168,757 27.16 % 1-4 Family Residential Construction 15,245 2.38 % 15,667 2.52 % Other Construction, Development and Land 75,840 11.86 % 76,713 12.35 % Home Equity and Second Mortgage 66,549 10.41 % 62,070 9.99 % Total Mortgage Loans 518,243 81.06 % 496,650 79.95 % Commercial Business Loans 62,727 9.81 % 68,223 10.98 % Consumer and Other 58,406 9.13 % 56,373 9.07 % Total Gross Loans 639,376 100.00 % 621,246 100.00 % Less: Deferred Loan Fees Net of Direct Costs (1,104 ) (1,168 ) Allowance for Credit Losses 9,281 8,005 Total Loans, Net $ 631,199 $ 614,409 3 Residential Loans.
Added
The Bank’s lending activities have concentrated on the origination of residential mortgages, including those secured by 1-4 family residential and multifamily properties, both for sale in the secondary market and for retention in the Bank’s loan portfolio. Substantially all residential mortgages are collateralized by properties within the Bank’s market area.
Added
The Bank offers both fixed-rate mortgage loans and adjustable rate mortgage (“ARM”) loans typically with terms of 15 to 30 years. The Bank uses loan documents approved by the Federal National Mortgage Corporation (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) whether the loan is originated for investment or sale in the secondary market.
Added
Retaining fixed-rate loans in its portfolio subjects the Bank to a higher degree of interest rate risk. See “ Item 1A. Risk Factors – Above Average Interest Rate Risk Associated with Fixed-Rate Loans ” for a further discussion of certain risks of rising interest rates.
Added
A strategic goal of the Bank is to expand its mortgage business by originating mortgage loans for sale, while offering a full line of mortgage products to current and prospective customers.
Added
This practice increases the Bank’s lending capacity and allows the Bank to more effectively manage its profitability since it is not required to predict the prepayment, credit or interest rate risks associated with retaining either the loan or the servicing asset.
Added
For the year ended December 31, 2024, the Bank originated and funded $32.8 million of residential mortgage loans for sale in the secondary market. For a further discussion of the Bank’s mortgage banking operations, see “

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed3 unchanged
Biggest changeMarket Price High Sale Low Sale Dividends end of Period 2023: First Quarter $ 28.99 $ 23.48 $ 0.27 $ 25.65 Second Quarter 31.50 22.85 0.27 30.80 Third Quarter 37.90 26.00 0.27 27.75 Fourth Quarter 29.99 22.95 0.27 27.90 2022: First Quarter $ 41.67 $ 38.51 $ 0.26 $ 39.20 Second Quarter 39.10 26.51 0.26 27.09 Third Quarter 31.77 25.70 0.26 25.71 Fourth Quarter 27.60 22.97 0.26 24.90 Dividend Policy It has been our policy to pay quarterly dividends to holders of our common stock, and we intend to continue paying dividends.
Biggest changeMarket Price High Sale Low Sale Dividends end of Period 2024: First Quarter $ 30.40 $ 26.03 $ 0.27 $ 28.55 Second Quarter 31.40 26.73 0.27 29.99 Third Quarter 38.00 29.01 0.29 34.96 Fourth Quarter 37.50 28.50 0.29 32.25 2023: First Quarter $ 28.99 $ 23.48 $ 0.27 $ 25.65 Second Quarter 31.50 22.85 0.27 30.80 Third Quarter 37.90 26.00 0.27 27.75 Fourth Quarter 29.99 22.95 0.27 27.90 Dividend Policy It has been our policy to pay quarterly dividends to holders of our common stock, and we intend to continue paying dividends.
The following table lists quarterly market price and dividend information per common share for the years ended December 31, 2023 and 2022 as reported by NASDAQ.
The following table lists quarterly market price and dividend information per common share for the years ended December 31, 2024 and 2023 as reported by NASDAQ.
Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 through October 31, 2023 - N/A - 115,828 November 1 through November 30, 2023 - N/A - 115,828 December 1 through December 31, 2023 - N/A - 115,828 Total - N/A - Equity Compensation Plan Information See Item 12 of this report for disclosure regarding securities authorized for issuance and equity compensation plans required by Item 201(d) of Regulation S-K.
Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 through October 31, 2024 - N/A - 114,021 November 1 through November 30, 2024 300 $ 34.50 300 113,721 December 1 through December 31, 2024 - N/A - 113,721 Total 300 $ 34.50 300 Equity Compensation Plan Information See Item 12 of this report for disclosure regarding securities authorized for issuance and equity compensation plans required by Item 201(d) of Regulation S-K.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The common shares of the Company are traded on The NASDAQ Capital Market under the symbol “FCAP.” As of December 31, 2023, the Company had 892 stockholders of record and 3,350,660 common shares outstanding.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The common shares of the Company are traded on The NASDAQ Capital Market under the symbol “FCAP.” As of December 31, 2024, the Company had 856 stockholders of record and 3,351,703 common shares outstanding.
The stock repurchase program will expire upon the purchase of the maximum number of shares authorized under the program, unless the board of directors terminates the program earlier. There were no shares purchased under the stock repurchase program during the quarter ended December 31, 2023. The maximum number of shares that may yet be purchased under the plan is 115,828.
The stock repurchase program will expire upon the purchase of the maximum number of shares authorized under the program, unless the board of directors terminates the program earlier. There were 300 shares purchased under the stock repurchase program during the quarter ended December 31, 2024. The maximum number of shares that may yet be purchased under the plan is 113,721.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

58 edited+17 added−20 removed81 unchanged
Biggest changeTax-exempt income on loans and investment securities has been adjusted to a tax equivalent basis using the federal marginal tax rate of 21%. 48 Year ended December 31, 2023 2022 2021 Average Average Average (Dollars in thousands) Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost Interest-earning assets: Loans (1) (2) (3): Taxable $ 582,465 $ 33,153 5.69 % $ 521,945 $ 24,768 4.75 % $ 489,803 $ 23,571 4.81 % Tax-exempt 8,144 249 3.06 % 8,214 240 2.92 % 8,680 255 2.94 % Total loans 590,609 33,402 5.66 % 530,159 25,008 4.72 % 498,483 23,826 4.78 % Investment securities: Taxable (4) 358,860 5,635 1.57 % 348,431 4,509 1.29 % 241,444 2,660 1.10 % Tax-exempt 147,667 4,236 2.87 % 147,215 4,056 2.76 % 122,506 3,423 2.79 % Total investment securities 506,527 9,871 1.95 % 495,646 8,565 1.73 % 363,950 6,083 1.67 % Federal funds sold 19,512 989 5.07 % 91,982 1,137 1.24 % 149,864 189 0.13 % Other interest-earning assets (5) 7,079 285 4.03 % 7,918 132 1.67 % 12,414 135 1.09 % Total interest-earning assets 1,123,727 44,547 3.96 % 1,125,705 34,842 3.10 % 1,024,711 30,233 2.95 % Noninterest-earning assets 20,139 28,849 61,048 Total assets $ 1,143,866 $ 1,154,554 $ 1,085,759 Interest-bearing liabilities: Interest-bearing demand deposits $ 447,895 $ 4,652 1.04 % $ 466,476 $ 928 0.20 % $ 427,381 $ 508 0.12 % Savings accounts 255,126 917 0.36 % 282,455 357 0.13 % 245,142 167 0.07 % Time deposits 91,423 2,672 2.92 % 53,851 309 0.57 % 62,008 453 0.73 % Total deposits 794,444 8,241 1.04 % 802,782 1,594 0.20 % 734,531 1,128 0.15 % FHLB advances 6,084 340 5.59 % - - 0.00 % - - 0.00 % BTFP advances 8,632 436 5.05 % - - 0.00 % - - 0.00 % Total borrowings 14,716 776 5.27 % - - 0.00 % - - 0.00 % Total interest-bearing liabilities 809,160 9,017 1.11 % 802,782 1,594 0.20 % 734,531 1,128 0.15 % Noninterest-bearing liabilities: Noninterest-bearing deposits 236,471 255,113 232,196 Other liabilities 7,056 5,591 6,487 Total liabilities 1,052,687 1,063,486 973,214 Stockholders' equity (6) 91,179 91,068 112,545 Total liabilities and stockholders' equity $ 1,143,866 $ 1,154,554 $ 1,085,759 Net interest income (tax equivalent basis) $ 35,530 $ 33,248 $ 29,105 Less: tax equivalent adjustment (942 ) (902 ) (773 ) Net interest income $ 34,588 $ 32,346 $ 28,332 Interest rate spread 2.85 % 2.90 % 2.80 % Net interest margin 3.16 % 2.95 % 2.84 % Ratio of average interest-earning assets to average interest-bearing liabilities 138.88 % 140.23 % 139.51 % (1) Interest income on loans includes fee income of $961,000, $925,000, and $2.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Biggest changeTax-exempt income on loans and investment securities has been adjusted to a tax equivalent basis using the federal marginal tax rate of 21%. 48 Year ended December 31, 2024 2023 2022 Average Average Average (Dollars in thousands) Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost Interest-earning assets: Loans (1) (2) (3): Taxable $ 624,193 $ 37,974 6.08 % $ 582,465 $ 33,153 5.69 % $ 521,945 $ 24,768 4.75 % Tax-exempt 9,805 377 3.84 % 8,144 249 3.06 % 8,214 240 2.92 % Total loans 633,998 38,351 6.05 % 590,609 33,402 5.66 % 530,159 25,008 4.72 % Investment securities: Taxable (4) 333,195 6,918 2.08 % 358,860 5,635 1.57 % 348,431 4,509 1.29 % Tax-exempt 121,947 3,329 2.73 % 147,667 4,236 2.87 % 147,215 4,056 2.76 % Total investment securities 455,142 10,247 2.25 % 506,527 9,871 1.95 % 495,646 8,565 1.73 % Federal funds sold 45,563 2,357 5.17 % 19,512 989 5.07 % 91,982 1,137 1.24 % Other interest-earning assets (5) 6,473 294 4.54 % 7,079 285 4.03 % 7,918 132 1.67 % Total interest-earning assets 1,141,176 51,249 4.49 % 1,123,727 44,547 3.96 % 1,125,705 34,842 3.10 % Noninterest-earning assets 28,479 20,139 28,849 Total assets $ 1,169,655 $ 1,143,866 $ 1,154,554 Interest-bearing liabilities: Interest-bearing demand deposits $ 433,495 $ 6,086 1.40 % $ 447,895 $ 4,652 1.04 % $ 466,476 $ 928 0.20 % Savings accounts 230,353 810 0.35 % 255,126 917 0.36 % 282,455 357 0.13 % Time deposits 156,534 6,331 4.04 % 91,423 2,672 2.92 % 53,851 309 0.57 % Total deposits 820,382 13,227 1.61 % 794,444 8,241 1.04 % 802,782 1,594 0.20 % FHLB advances 1,736 99 5.70 % 6,084 340 5.59 % - - 0.00 % BTFP advances 27,918 1,355 4.85 % 8,632 436 5.05 % - - 0.00 % Total borrowings 29,654 1,454 4.90 % 14,716 776 5.27 % - - 0.00 % Total interest-bearing liabilities 850,036 14,681 1.73 % 809,160 9,017 1.11 % 802,782 1,594 0.20 % Noninterest-bearing liabilities: Noninterest-bearing deposits 203,699 236,471 255,113 Other liabilities 7,046 7,056 5,591 Total liabilities 1,060,781 1,052,687 1,063,486 Stockholders' equity (6) 108,874 91,179 91,068 Total liabilities and stockholders' equity $ 1,169,655 $ 1,143,866 $ 1,154,554 Net interest income (tax equivalent basis) $ 36,568 $ 35,530 $ 33,248 Less: tax equivalent adjustment (778 ) (942 ) (902 ) Net interest income $ 35,790 $ 34,588 $ 32,346 Interest rate spread 2.70 % 2.77 % 2.82 % Interest rate spread (tax equivalent basis) 2.76 % 2.85 % 2.90 % Net interest margin 3.14 % 3.08 % 2.87 % Net interest margin (tax equivalent basis) 3.20 % 3.16 % 2.95 % Ratio of average interest-earning assets to average interest-bearing liabilities 134.25 % 138.88 % 140.23 % (1) Interest income on loans includes fee income of $727,000, $961,000, and $925,000 for the years ended December 31, 2024, 2023, and 2022, respectively.
The Bank’s results of operations depend primarily on net interest income, which is the difference between the income earned on its interest-earning assets, such as loans and investments, and the cost of its interest-bearing liabilities, consisting primarily of deposits and borrowings from the FHLB and BTFP.
The Bank’s results of operations depend primarily on net interest income, which is the difference between the income earned on its interest-earning assets, such as loans and investments, and the cost of its interest-bearing liabilities, consisting primarily of deposits and borrowings from the FHLB.
In addition to its operating expenses, the Company requires funds to pay any dividends to its shareholders and to repurchase any shares of its common stock. The Company’s primary source of income is dividends received from the Bank and the Captive.
In addition to its operating expenses, the Company requires funds to pay any dividends to its shareholders and to repurchase any shares of its common stock. The Company’s primary source of income is dividends received from the Bank.
The Bank invests excess cash in securities that provide safety, liquidity and yield. Accordingly, we purchase mortgage-backed securities to provide cash flow for loan demand and deposit changes, we purchase U.S Treasury and federal agency notes for short-term yield and low risk, and municipals are purchased to improve our tax equivalent yield focusing on longer term profitability.
The Bank invests excess cash in securities that provide liquidity, yield and low credit risk. Accordingly, we purchase mortgage-backed securities to provide cash flow for loan demand and deposit changes, we purchase U.S Treasury and federal agency notes for short-term yield and low risk, and municipals are purchased to improve our tax equivalent yield focusing on longer term profitability.
Our focus in 2024 will be to continue the enhancement and expansion of our customer relationships in these and surrounding markets. ● Ensuring that the Company attracts and retains talented personnel and that an optimal level of performance and customer service is promoted at all levels of the Company. 42 Critical Accounting Policies and Estimates The accounting and reporting policies of the Company comply with U.S.
Our focus in 2025 will be to continue the enhancement and expansion of our customer relationships in these and surrounding markets. ● Ensuring that the Company attracts and retains talented personnel and that an optimal level of performance and customer service is promoted at all levels of the Company. 42 Critical Accounting Policies and Estimates The accounting and reporting policies of the Company comply with U.S.
Results of the Company’s simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s net interest income could change as follows over a one-year horizon, relative to our base case scenario, based on December 31, 2023 and 2022 financial information.
Results of the Company’s simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s net interest income could change as follows over a one-year horizon, relative to our base case scenario, based on December 31, 2024 and 2023 financial information.
Results of the Company’s simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s EVE could change as follows, relative to the Company’s base case scenario, based on December 31, 2023 and 2022 financial information.
Results of the Company’s simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s EVE could change as follows, relative to the Company’s base case scenario, based on December 31, 2024 and 2023 financial information.
In 2024, management will continue to focus on maintaining the reduced level of nonperforming assets through improved collection efforts and underwriting on nonperforming loans. ● Being active in the local community, particularly through our efforts with local schools, to uphold our high standing in our community and marketing to our next generation of customers. ● Improving profitability by expanding our product offerings to customers and leveraging recent investments in technology to increase the productivity and efficiency of our staff.
In 2025, management will continue to focus on maintaining a reduced level of nonperforming assets through improved collection efforts and underwriting on nonperforming loans. ● Being active in the local community, particularly through our efforts with local schools, to uphold our high standing in our community and marketing to our next generation of customers. ● Improving profitability by expanding our product offerings to customers and leveraging recent investments in technology to increase the productivity and efficiency of our staff.
At December 31, 2023 and 2022, an immediate and sustained decrease in rates of 1.00% would also increase the Company’s net interest income over a one year horizon compared to a flat rates scenario.
At December 31, 2023, an immediate and sustained decrease in rates of 1.00% would increase the Company’s net interest income over a one year horizon compared to a flat rates scenario.
(8) Nonperforming assets consist of nonperforming loans and real estate acquired in settlement of loans. 45 Results of Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Net Income.
(8) Nonperforming assets consist of nonperforming loans and real estate acquired in settlement of loans. 45 Results of Operations for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Net Income.
If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, the FRB’s BTFP through the pledging of additional eligible collateral securities, collateral eligible for repurchase agreements and unsecured federal funds purchased lines of credit with other financial institutions.
If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, the FRB’s Discount Window through the pledging of additional eligible collateral securities, collateral eligible for repurchase agreements and unsecured federal funds purchased lines of credit with other financial institutions.
The changes in interest income and interest expense resulting from changes in volume and changes in rates for 2023 and 2022 are shown in the schedule captioned “ Rate/Volume Analysis ” included herein. Provision for Credit Losses .
The changes in interest income and interest expense resulting from changes in volume and changes in rates for 2024 and 2023 are shown in the schedule captioned “ Rate/Volume Analysis ” included herein. Provision for Credit Losses .
The changes in interest income and interest expense resulting from changes in volume and changes in rates for 2022 and 2021 are shown in the schedule captioned “ Rate/Volume Analysis ” included herein. Provision for Loan Losses .
The changes in interest income and interest expense resulting from changes in volume and changes in rates for 2023 and 2022 are shown in the schedule captioned “ Rate/Volume Analysis ” included herein. Provision for Loan Losses .
A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. Note 1 and Note 4 of the accompanying Notes to Consolidated Financial Statements describe the methodology used to determine the ACL on loans. 43 Valuation Methodologies .
A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. Note 1 and Note 4 of the accompanying Notes to Consolidated Financial Statements describe the methodology used to determine the ACL on loans. 43 Selected Financial Data.
(2) Per share data excludes net income attributable to noncontrolling interests. 44 At or For the Year Ended SELECTED FINANCIAL RATIOS: December 31, 2023 2022 2021 2020 2019 Performance Ratios: Return on assets (1) 1.12 % 1.03 % 1.05 % 1.12 % 1.26 % Return on average equity (2) 14.03 % 13.07 % 10.15 % 9.64 % 11.13 % Dividend payout ratio (3) 28.27 % 29.30 % 30.50 % 31.68 % 30.65 % Average equity to average assets 7.97 % 7.89 % 10.37 % 11.57 % 11.36 % Interest rate spread (4) 2.85 % 2.90 % 2.80 % 3.32 % 3.93 % Net interest margin (5) 3.16 % 2.95 % 2.84 % 3.39 % 4.02 % Non-interest expense to average assets 2.28 % 2.17 % 2.26 % 2.54 % 2.85 % Average interest earning assets to average interest bearing liabilities 138.88 % 140.23 % 139.51 % 137.42 % 134.04 % Regulatory Capital Ratios (Bank only): Community bank leverage ratio (6) 9.92 % 9.18 % 8.84 % 9.37 % 10.01 % Tier 1 risk-based capital ratio 14.03 % Common equity tier 1 capital ratio 14.03 % Total risk-based capital ratio 14.90 % Asset Quality Ratios: Nonperforming loans as a percent of net loans (7) 0.28 % 0.27 % 0.28 % 0.29 % 0.38 % Nonperforming assets as a percent of total assets (8) 0.15 % 0.13 % 0.12 % 0.14 % 0.24 % Allowance for credit losses as a percent of gross loans receivable 1.29 % 1.20 % 1.25 % 1.31 % 1.08 % (1) Net income attributable to First Capital, Inc. divided by average assets.
(2) Per share data excludes net income attributable to noncontrolling interests. 44 At or For the Year Ended SELECTED FINANCIAL RATIOS: December 31, 2024 2023 2022 2021 2020 Performance Ratios: Return on assets (1) 1.02 % 1.12 % 1.03 % 1.05 % 1.12 % Return on average equity (2) 10.97 % 14.03 % 13.07 % 10.15 % 9.64 % Dividend payout ratio (3) 31.37 % 28.27 % 29.30 % 30.50 % 31.68 % Average equity to average assets 9.31 % 7.97 % 7.89 % 10.37 % 11.57 % Interest rate spread (4) 2.76 % 2.85 % 2.90 % 2.80 % 3.32 % Net interest margin (5) 3.20 % 3.16 % 2.95 % 2.84 % 3.39 % Non-interest expense to average assets 2.38 % 2.28 % 2.17 % 2.26 % 2.54 % Average interest earning assets to average interest bearing liabilities 134.25 % 138.88 % 140.23 % 139.51 % 137.42 % Regulatory Capital Ratios (Bank only): Community bank leverage ratio (6) 10.57 % 9.92 % 9.18 % 8.84 % 9.37 % Asset Quality Ratios: Nonperforming loans as a percent of net loans (7) 0.69 % 0.28 % 0.27 % 0.28 % 0.29 % Nonperforming assets as a percent of total assets (8) 0.37 % 0.15 % 0.13 % 0.12 % 0.14 % Allowance for credit losses as a percent of gross loans receivable 1.45 % 1.29 % 1.20 % 1.25 % 1.31 % (1) Net income attributable to First Capital, Inc. divided by average assets.
Alternatively, at December 31, 2023, an immediate and sustained decrease in rates of 2.00% would decrease the Company’s net interest income over a one year horizon compared to a flat interest rate scenario compared to an increase in the Company’s net interest income over a one year horizon compared to a flat interest rate scenario at December 31, 2022.
At December 31, 2023, an immediate and sustained decrease in rates of 2.00% and 3.00% would decrease the Company’s net interest income over a one year horizon compared to a flat interest rate scenario.
(4) Includes taxable debt and equity securities and FHLB Stock. (5) Includes interest-bearing deposits with banks, federal funds sold and interest-bearing time deposits. (6) Stockholders' equity attributable to First Capital, Inc. 49 Rate/Volume Analysis . The following table sets forth the effects of changing rates and volumes on net interest income and interest expense computed on a tax-equivalent basis.
(5) Includes interest-bearing deposits with banks, federal funds sold and interest-bearing time deposits. (6) Stockholders' equity attributable to First Capital, Inc. 49 Rate/Volume Analysis . The following table sets forth the effects of changing rates and volumes on net interest income and interest expense computed on a tax-equivalent basis.
The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. At December 31, 2023, the Bank had total commitments to extend credit of $181.7 million. See Note 16 in the accompanying Notes to Consolidated Financial Statements.
The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. At December 31, 2024, the Bank had total commitments to extend credit of $154.9 million. See Note 16 in the accompanying Notes to Consolidated Financial Statements.
As of December 31, 2023 the Bank was in compliance with all regulatory capital requirements which were effective as of such date with a CBLR of 9.92%. See Note 18 in the accompanying Notes to Consolidated Financial Statements. On September 24, 2020, the Company filed an automatic shelf registration statement with the SEC.
As of December 31, 2024 the Bank was in compliance with all regulatory capital requirements which were effective as of such date with a CBLR of 10.57%. See Note 18 in the accompanying Notes to Consolidated Financial Statements. On September 24, 2020, the Company filed an automatic shelf registration statement with the SEC.
At December 31, 2023, the Bank had certificates of deposit scheduled to mature within one year of $110.7 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
At December 31, 2024, the Bank had certificates of deposit scheduled to mature within one year of $188.2 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
Indicators include the following: ● Net income and earnings per share – Net income attributable to the Company was $12.8 million, or $3.82 per diluted share for 2023 compared to $11.9 million, or $3.55 per diluted share for 2022 and $11.4 million, or $3.41 per diluted share for 2021. ● Return on average assets and return on average equity – Return on average assets for 2023 was 1.12% compared to 1.03% for 2022 and 1.05% for 2021, and return on average equity for 2023 was 14.03% compared to 13.07% for 2022 and 10.15% for 2021. ● Efficiency ratio – The Company’s efficiency ratio (defined as noninterest expenses divided by net interest income plus noninterest income) was 61.6% for 2023 compared to 62.3% for 2022 and 64.8% for 2021. ● Asset quality – Net loan charge-offs totaled $217,000 for 2021, $261,000 for 2022 and $469,000 for 2023, and the ratio of net charge-offs to average loans outstanding remained virtually unchanged at 0.04% for 2021, 0.05% for 2022 and 0.08% for 2023.
Indicators include the following: ● Net income and earnings per share – Net income attributable to the Company was $11.9 million, or $3.57 per diluted share for 2024 compared to $12.8 million, or $3.82 per diluted share for 2023 and $11.9 million, or $3.55 per diluted share for 2022. ● Return on average assets and return on average equity – Return on average assets for 2024 was 1.02% compared to 1.12% for 2023 and 1.03% for 2022, and return on average equity for 2024 was 10.97% compared to 14.03% for 2023 and 13.07% for 2022. ● Efficiency ratio – The Company’s efficiency ratio (defined as noninterest expenses divided by net interest income plus noninterest income) was 64.1% for 2024 compared to 61.6% for 2023 and 62.3% for 2022. ● Asset quality – Net loan charge-offs totaled $261,000 for 2022, $469,000 for 2023 and $173,000 for 2024, and the ratio of net charge-offs to average loans outstanding remained virtually unchanged at 0.05% for 2022, 0.08% for 2023 and 0.03% for 2024.
During the year ended December 31, 2023, management evaluated and adjusted deposit rate betas in its scenarios to better reflect the increasing rate environment and increased competitive pressure for deposits. The Company also has longer term interest rate risk exposure, which may not be appropriately measured by Net Interest Income at Risk modeling.
During the year ended December 31, 2024, management evaluated and adjusted deposit rate betas and key interest rate index ties in its scenarios to better reflect the current interest rate environment and increased competitive pressure for deposits. The Company also has longer term interest rate risk exposure, which may not be appropriately measured by Net Interest Income at Risk modeling.
The total return for the three-year period was -48.9%. Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company and the Bank.
The total return for the three-year period was -10.8%. Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company and the Bank.
At December 31, 2023, the Company (on an unconsolidated basis) had liquid assets of $3.8 million. The Bank is required to maintain specific amounts of capital pursuant to regulations. As previously mentioned in this report, in 2020 the Bank elected to opt in to the CBLR framework.
At December 31, 2024, the Company (on an unconsolidated basis) had liquid assets of $2.9 million. The Bank is required to maintain specific amounts of capital pursuant to regulations. As previously mentioned in this report, in 2020 the Bank elected to opt in to the CBLR framework.
As of December 31, 2023, the Company had repurchased 124,639 shares of the 240,467 shares authorized by the Board of Directors under the current stock repurchase program which was announced in August 2008 and 453,173 shares since the original repurchase program began in 2001. 51 Liquidity and Capital Resources Liquidity refers to the ability of a financial institution to generate sufficient cash flow to fund current loan demand, meet deposit withdrawals and pay operating expenses.
As of December 31, 2024, the Company had repurchased 126,746 shares of the 240,467 shares authorized by the Board of Directors under the current stock repurchase program which was announced in August 2008 and 455,280 shares since the original repurchase program began in 2001. 51 Liquidity and Capital Resources Liquidity refers to the ability of a financial institution to generate sufficient cash flow to fund current loan demand, meet deposit withdrawals and pay operating expenses.
Securities available for sale, at fair value, consisting primarily of U.S. agency mortgage-backed securities and collateralized mortgage obligations, U.S. agency notes and bonds, Treasury notes and bonds and municipal obligations, decreased from $460.8 million at December 31, 2022 to $437.3 million at December 31, 2023.
Securities available for sale, at fair value, consisting primarily of U.S. agency mortgage-backed securities and collateralized mortgage obligations, U.S. agency notes and bonds, Treasury notes and bonds and municipal obligations, decreased from $437.3 million at December 31, 2023 to $389.2 million at December 31, 2024.
At December 31, 2023, the Company would also expect decreases in its EVE in the event of sudden and sustained 200 and 300 basis points increases in prevailing interest rates as well as a sudden and sustained decrease of 100 basis points in prevailing interest rates.
At December 31, 2023, the Company would expect decreases in its EVE in the event of sudden and sustained 200 and 300 basis points increases in prevailing interest rates as well as a sudden and sustained decrease of 100, 200 and 300 basis points in prevailing interest rates, while it would expect an increase in its EVE in the event of a sudden and sustained 100 basis point increase in prevailing interest rates.
As previously mentioned in this report, during the year ended December 31, 2023, the Company adjusted deposit rate betas in its scenarios to better reflect the increasing rate environment and increased competitive pressure for deposits.
As previously mentioned in this report, during the year ended December 31, 2023, the Company evaluated and adjusted deposit rate betas and key interest rate index ties in its scenarios to better reflect the current interest rate environment and increased competitive pressure for deposits.
FINANCIAL CONDITION DATA: At December 31, 2023 2022 2021 2020 2019 (In thousands) Total assets $ 1,157,880 $ 1,151,400 $ 1,156,603 $ 1,017,551 $ 827,496 Cash and cash equivalents (1) 38,670 66,298 172,509 175,888 51,360 Securities available for sale 437,271 460,819 447,335 283,502 254,562 Securities held to maturity 7,000 7,000 2,000 - - Interest-bearing time deposits 3,920 3,677 4,839 6,396 6,490 Net loans 614,409 557,958 483,287 500,331 466,494 Deposits 1,025,211 1,060,396 1,035,562 900,461 722,177 Borrowings 21,500 - - - - Stockholders' equity, net of noncontrolling interest in subsidiary 105,233 85,158 113,828 110,639 98,836 For the Year Ended OPERATING DATA: December 31, 2023 2022 2021 2020 2019 (In thousands) Interest income $ 43,605 $ 33,940 $ 29,460 $ 29,647 $ 32,054 Interest expense 9,017 1,594 1,128 1,561 1,960 Net interest income 34,588 32,346 28,332 28,086 30,094 Provision for (recapture of) credit losses 1,141 950 (325 ) 1,801 1,425 Net interest income after provision for (recapture of) credit losses 33,447 31,396 28,657 26,285 28,669 Noninterest income 7,632 7,927 9,551 8,599 6,926 Noninterest expense 26,028 25,088 24,531 23,048 23,270 Income before income taxes 15,051 14,235 13,677 11,836 12,325 Income tax expense 2,248 2,320 2,240 1,692 1,987 Net Income 12,803 11,915 11,437 10,144 10,338 Less: net income attributable to noncontrolling interest in subsidiary 13 13 13 13 13 Net Income attributable to First Capital Inc. $ 12,790 $ 11,902 $ 11,424 $ 10,131 $ 10,325 PER SHARE DATA (2): Net income - basic $ 3.82 $ 3.55 $ 3.41 $ 3.03 $ 3.10 Net income - diluted 3.82 3.55 3.41 3.02 3.09 Dividends 1.08 1.04 1.04 0.96 0.95 (1) Includes cash and due from banks, interest-bearing deposits in other depository institutions and federal funds sold.
FINANCIAL CONDITION DATA: At December 31, 2024 2023 2022 2021 2020 (In thousands) Total assets $ 1,187,523 $ 1,157,880 $ 1,151,400 $ 1,156,603 $ 1,017,551 Cash and cash equivalents (1) 105,917 38,670 66,298 172,509 175,888 Securities available for sale 389,243 437,271 460,819 447,335 283,502 Securities held to maturity 7,000 7,000 7,000 2,000 - Interest-bearing time deposits 2,695 3,920 3,677 4,839 6,396 Net loans 631,199 614,409 557,958 483,287 500,331 Deposits 1,066,439 1,025,211 1,060,396 1,035,562 900,461 Borrowings - 21,500 - - - Stockholders' equity, net of noncontrolling interest in subsidiary 114,599 105,233 85,158 113,828 110,639 For the Year Ended OPERATING DATA: December 31, 2024 2023 2022 2021 2020 (In thousands) Interest income $ 50,471 $ 43,605 $ 33,940 $ 29,460 $ 29,647 Interest expense 14,681 9,017 1,594 1,128 1,561 Net interest income 35,790 34,588 32,346 28,332 28,086 Provision for (recapture of) credit losses 1,449 1,141 950 (325 ) 1,801 Net interest income after provision for (recapture of) credit losses 34,341 33,447 31,396 28,657 26,285 Noninterest income 7,656 7,632 7,927 9,551 8,599 Noninterest expense 27,828 26,028 25,088 24,531 23,048 Income before income taxes 14,169 15,051 14,235 13,677 11,836 Income tax expense 2,216 2,248 2,320 2,240 1,692 Net Income 11,953 12,803 11,915 11,437 10,144 Less: net income attributable to noncontrolling interest in subsidiary 13 13 13 13 13 Net Income attributable to First Capital Inc. $ 11,940 $ 12,790 $ 11,902 $ 11,424 $ 10,131 PER SHARE DATA (2): Net income - basic $ 3.57 $ 3.82 $ 3.55 $ 3.41 $ 3.03 Net income - diluted 3.57 3.82 3.55 3.41 3.02 Dividends 1.12 1.08 1.04 1.04 0.96 (1) Includes cash and due from banks, interest-bearing deposits in other depository institutions and federal funds sold.
The Bank recognized net charge-offs of $469,000 for 2023 compared to $261,000 for 2022. In addition, nonperforming loans increased from $1.3 million at December 31, 2022 to $1.8 million at December 31, 2023. 46 Noninterest Income .
Total loans outstanding increased $57.7 million during 2023 in addition to the $75.3 increase in 2022. The Bank recognized net charge-offs of $469,000 for 2023 compared to $261,000 for 2022. In addition, nonperforming loans increased from $1.3 million at December 31, 2022 to $1.8 million at December 31, 2023. Noninterest Income .
The net unrealized gain on available for sale securities during 2023 is primarily due to decreases in market interest rates.
The decrease in the net unrealized loss on available for sale securities during 2024 is primarily due to decreases in market interest rates.
We have also recently completed a profit improvement project with an outside consulting firm that we believe will improve overall profitability in future periods through increased noninterest income and decreased noninterest expenses. ● Continuing to emphasize commercial real estate and other commercial business lending as well as consumer lending.
We continue to implement recommendations from a previously completed profit improvement project conducted by an outside consulting firm that we believe will improve overall profitability in future periods through increased noninterest income and decreased noninterest expenses. ● Continuing to emphasize commercial real estate and other commercial business lending as well as consumer lending.
There were no borrowed funds outstanding at December 31, 2022. During the year ended December 31, 2023, the Company utilized a series of short-term fixed-rate bullet and variable rate advances from the FHLB and the BTFP in order to meet daily liquidity requirements and to fund growth in earning assets.
During the year ended December 31, 2024, the Company utilized a series of short-term fixed-rate bullet and variable rate advances from the FHLB and the BTFP in order to meet daily liquidity requirements and to fund growth in earning assets.
To accomplish these objectives, the Company has focused on the following: ● Monitoring asset quality and credit risk in the loan and investment portfolios, with an emphasis on those heavily impacted by the pandemic, and originating high-quality commercial and consumer loans.
To accomplish these objectives, the Company has focused on the following: ● Monitoring asset quality and credit risk in the loan and investment portfolios and originating high-quality commercial and consumer loans.
(2) Average loan balances include loans held for sale and nonperforming loans. (3) Interest income on loans includes net accretion on acquired loans of $10,000 and $1,000 for the the years ended December 31, 2022 and 2021, respectively. There was no net accretion of acquired loans for the year ended December 31, 2023.
(2) Average loan balances include loans held for sale and nonperforming loans. (3) Interest income on loans includes net accretion on acquired loans of $10,000 for the the year ended December 31, 2022. There was no net accretion of acquired loans for the years ended December 31, 2024 and 2023. (4) Includes taxable debt and equity securities and FHLB Stock.
Total stockholders’ equity attributable to the Company increased $20.1 million from $85.2 million at December 31, 2022 to $105.2 million at December 31, 2023. This increase is primarily the result of a $11.7 million net unrealized gain on available for sale securities and the $8.6 million increase in retained net income.
Total stockholders’ equity attributable to the Company increased $9.4 million from $105.2 million at December 31, 2023 to $114.6 million at December 31, 2024. This increase is primarily the result of the $8.2 million increase in retained net income and a $1.0 million decrease in the net unrealized loss on available for sale securities.
The ACL on loans was 1.29% of total outstanding loans and 457.2% of nonaccrual loans at December 31, 2023 compared to 1.20% of total outstanding loans and 454.5% of nonaccrual loans at December 31, 2022. ● Shareholder return – Total annual shareholder return, including the increase in the Company’s stock price from $24.90 at December 31, 2022 to $27.90 at December 31, 2023 and dividends of $1.08 per share, was 16.4% for 2023 compared to -36.0% for 2022 and -31.4% for 2021.
The ACL on loans was 1.45% of total outstanding loans and 211.8% of nonaccrual loans at December 31, 2024 compared to 1.29% of total outstanding loans and 457.2% of nonaccrual loans at December 31, 2023. ● Shareholder return – Total annual shareholder return, including the increase in the Company’s stock price from $27.90 at December 31, 2023 to $32.25 at December 31, 2024 and dividends of $1.12 per share, was 19.6% for 2024 compared to 16.4% for 2023 and -36.0% for 2022.
Principal repayments of $15.8 million, maturities of $38.0 million and sales of $20.6 million during 2023 were only partially offset by purchases of $37.2 million of securities. There was also an unrealized gain of $15.3 million on the securities available for sale portfolio during 2023 due primarily to stabilizing market rates during the year.
Principal repayments of $28.1 million, maturities of $63.0 million and sales of $19.2 million during 2024 were only partially offset by purchases of $61.7 million of securities. There was also an unrealized gain of $1.6 million on the securities available for sale portfolio during 2024 due primarily to stabilizing market rates during the year.
At December 31, 2023 At December 31, 2022 Immediate Change One Year Horizon One Year Horizon in the Level Dollar Percent Dollar Percent of Interest Rates Change Change Change Change (Dollars in thousands) 300bp $ 503 1.44 % $ 4,012 11.28 % 200bp 354 1.01 2,683 7.54 100bp 199 0.57 1,345 3.78 Static - - - - (100)bp 72 0.21 2,945 8.28 (200)bp (48 ) (0.13 ) 1,117 3.14 (300)bp (734 ) (2.10 ) (798 ) (2.25 ) 53 At December 31, 2023 and 2022, the Company’s simulated exposure to an increase in interest rates shows that an immediate and sustained increase in rates of 1.00%, 2.00% or 3.00% would increase the Company’s net interest income over a one year horizon compared to a flat interest rate scenario.
At December 31, 2024 At December 31, 2023 Immediate Change One Year Horizon One Year Horizon in the Level Dollar Percent Dollar Percent of Interest Rates Change Change Change Change (Dollars in thousands) 300bp $ 1,314 3.56 % $ 503 1.44 % 200bp 1,154 3.13 354 1.01 100bp 656 1.78 199 0.57 Static - - - - (100)bp (897 ) (2.43 ) 72 0.21 (200)bp (1,681 ) (4.55 ) (48 ) (0.13 ) (300)bp (2,490 ) (6.74 ) (734 ) (2.10 ) 53 At December 31, 2024 and 2023, the Company’s simulated exposure to an increase in interest rates shows that an immediate and sustained increase in rates of 1.00%, 2.00% or 3.00% would increase the Company’s net interest income over a one year horizon compared to a flat interest rate scenario.
At December 31, 2023, the Bank had cash and cash equivalents of $38.7 million and securities available-for-sale with a fair value of $437.3 million.
At December 31, 2024, the Bank had cash and cash equivalents of $105.9 million and securities available-for-sale with a fair value of $389.2 million.
Net income attributable to the Company was $11.9 million ($3.55 per share diluted; weighted average common shares outstanding of 3,355,023, as adjusted) for the year ended December 31, 2022 compared to $11.4 million ($3.41 per share diluted; weighted average common shares outstanding of 3,346,495, as adjusted) for the year ended December 31, 2021. Net Interest Income.
Net income attributable to the Company was $11.9 million ($3.57 per share diluted; weighted average common shares outstanding of 3,346,161, as adjusted) for the year ended December 31, 2023 compared to $12.8 million ($3.82 per share diluted; weighted average common shares outstanding of 3,347,341, as adjusted) for the year ended December 31, 2023. Net Interest Income.
The Bank continued to sell the majority of newly originated fixed-rate residential mortgage loans in the secondary market. The Bank originated $31.6 million in residential mortgages for sale in the secondary market during 2023 compared to $49.2 million in 2022.
The Bank continued to sell the majority of newly originated fixed-rate residential mortgage loans in the secondary market. The Bank originated $32.8 million in residential mortgages for sale in the secondary market during 2024 compared to $31.6 million in 2023. Of the total originations in 2024, $6.7 million paid off existing loans in the Bank’s portfolio.
Due to increasing market rates during 2022, the Company began modeling an immediate and sustained decrease of 3.00% and at both December 31, 2023 and 2022 the results would be a decrease in the Company’s net interest income over a one year horizon compared to a flat interest rate scenario.
At December 31, 2024, an immediate and sustained decrease in rates of 1.00%, 2.00% or 3.00% would decrease the Company’s net interest income over a one year horizon compared to a flat interest rate scenario.
Of the total originations for 2023, $9.8 million paid off existing loans in the Bank’s portfolio, the majority of which were construction loans. Originating mortgage loans for sale in the secondary market allows the Bank to better manage its interest rate risk, while offering a full line of mortgage products to prospective customers.
Originating mortgage loans for sale in the secondary market allows the Bank to better manage its interest rate risk, while offering a full line of mortgage products to prospective customers.
Tax exempt income on loans and investment securities has been adjusted to a tax-equivalent basis using the federal marginal tax rate of 21%. 2023 Compared to 2022 2022 Compared to 2021 Increase (Decrease) Due to Increase (Decrease) Due to Rate/ Rate/ Rate Volume Volume Net Rate Volume Volume Net (In thousands) Interest-earning assets: Loans: Taxable $ 4,941 $ 2,875 $ 569 $ 8,385 $ (298 ) $ 1,514 $ (19 ) $ 1,197 Tax-exempt 11 (2 ) - 9 (2 ) (13 ) - (15 ) Total loans 4,952 2,873 569 8,394 (300 ) 1,501 (19 ) 1,182 Investment securities: Taxable 962 135 29 1,126 462 1,184 203 1,849 Tax-exempt 168 12 - 180 (38 ) 678 (7 ) 633 Total investment securities securities 1,130 147 29 1,306 424 1,862 196 2,482 Federal funds sold 3,527 (899 ) (2,776 ) (148 ) 1,665 (75 ) (642 ) 948 Other interest-earnings assets 187 (14 ) (20 ) 153 72 (49 ) (26 ) (3 ) Total net change in income on interest-earning assets 9,796 2,107 (2,198 ) 9,705 1,861 3,239 (491 ) 4,609 Interest-bearing liabilities: Interest-bearing deposits 6,734 (17 ) (70 ) 6,647 337 95 34 466 Borrowed funds - - 776 776 - - - - Total net change in expense on interest-bearing liabilities 6,734 (17 ) 706 7,423 337 95 34 466 Net change in net interest income (tax equivalent basis) $ 3,062 $ 2,124 $ (2,904 ) $ 2,282 $ 1,524 $ 3,144 $ (525 ) $ 4,143 50 Comparison of Financial Condition at December 31, 2023 and 2022 Total assets increased from $1.15 billion at December 31, 2022 to $1.16 billion at December 31, 2023 primarily due to an increase in net loans receivable partially offset by decreases in total cash and cash equivalents and securities available for sale.
Tax exempt income on loans and investment securities has been adjusted to a tax-equivalent basis using the federal marginal tax rate of 21%. 2024 Compared to 2023 2023 Compared to 2022 Increase (Decrease) Due to Increase (Decrease) Due to Rate/ Rate/ Rate Volume Volume Net Rate Volume Volume Net (In thousands) Interest-earning assets: Loans: Taxable $ 2,284 $ 2,374 $ 163 $ 4,821 $ 4,941 $ 2,875 $ 569 $ 8,385 Tax-exempt 64 51 13 128 11 (2 ) - 9 Total loans 2,348 2,425 176 4,949 4,952 2,873 569 8,394 Investment securities: Taxable 1,817 (403 ) (131 ) 1,283 962 135 29 1,126 Tax-exempt (205 ) (738 ) 36 (907 ) 168 12 - 180 Total investment securities securities 1,612 (1,141 ) (95 ) 376 1,130 147 29 1,306 Federal funds sold 21 1,321 26 1,368 3,527 (899 ) (2,776 ) (148 ) Other interest-earnings assets 36 (24 ) (3 ) 9 187 (14 ) (20 ) 153 Total net change in income on interest- earning assets 4,017 2,581 104 6,702 9,796 2,107 (2,198 ) 9,705 Interest-bearing liabilities: Interest-bearing deposits 4,568 270 148 4,986 6,734 (17 ) (70 ) 6,647 Borrowed funds (54 ) 787 (55 ) 678 - - 776 776 Total net change in expense on interest- bearing liabilities 4,514 1,057 93 5,664 6,734 (17 ) 706 7,423 Net change in net interest income (tax equivalent basis) $ (497 ) $ 1,524 $ 11 $ 1,038 $ 3,062 $ 2,124 $ (2,904 ) $ 2,282 50 Comparison of Financial Condition at December 31, 2024 and 2023 Total assets increased from $1.16 billion at December 31, 2023 to $1.19 billion at December 31, 2024 primarily due to increases in total cash and cash equivalents and net loans receivable partially offset by a decrease in securities available for sale.
At December 31, 2023 Immediate Change Economic Value of Equity Economic Value of Equity as a in the Level Dollar Dollar Percent Percent of Present Value of Assets of Interest Rates Amount Change Change EVE Ratio Change (Dollars in thousands) 300bp $ 206,434 $ (4,405 ) (2.09 )% 19.65 % 111bp 200bp 209,839 (1,000 ) (0.47 ) 19.45 91bp 100bp 211,505 666 0.32 19.09 55bp Static 210,839 - - 18.54 0bp (100)bp 209,270 (1,569 ) (0.74 ) 17.94 (60)bp (200)bp 204,705 (6,134 ) (2.91 ) 17.10 (144)bp (300)bp 191,171 (19,668 ) (9.33 ) 15.61 (293)bp At December 31, 2022 Immediate Change Economic Value of Equity Economic Value of Equity as a in the Level Dollar Dollar Percent Percent of Present Value of Assets of Interest Rates Amount Change Change EVE Ratio Change (Dollars in thousands) 300bp $ 322,611 $ 25,242 8.49 % 30.96 % 464bp 200bp 319,861 22,492 7.56 29.87 355bp 100bp 311,941 14,572 4.90 28.36 204bp Static 297,369 - - 26.32 0bp (100)bp 306,021 8,652 2.91 26.36 4bp (200)bp 271,270 (26,099 ) (8.78 ) 22.76 (356)bp (300)bp 227,786 (69,583 ) (23.40 ) 18.62 (770)bp 54 The previous tables indicate that at December 31, 2023 and 2022 the Company would expect an increase in its EVE in the event of a sudden and sustained 100 basis point increase in prevailing interest rates and a decrease in its EVE in the event of a sudden and sustained 200 and 300 basis point decrease in prevailing interest rates.
At December 31, 2024 Immediate Change Economic Value of Equity Economic Value of Equity as a in the Level Dollar Dollar Percent Percent of Present Value of Assets of Interest Rates Amount Change Change EVE Ratio Change (Dollars in thousands) 300bp $ 257,887 $ 10,236 4.13 % 23.76 % 261bp 200bp 257,819 10,168 4.11 23.17 202bp 100bp 254,035 6,384 2.58 22.26 111bp Static 247,651 - - 21.15 0bp (100)bp 230,424 (17,227 ) (6.96 ) 19.24 (192)bp (200)bp 212,461 (35,190 ) (14.21 ) 17.26 (389)bp (300)bp 190,313 (57,338 ) (23.15 ) 15.02 (613)bp At December 31, 2023 Immediate Change Economic Value of Equity Economic Value of Equity as a in the Level Dollar Dollar Percent Percent of Present Value of Assets of Interest Rates Amount Change Change EVE Ratio Change (Dollars in thousands) 300bp $ 206,434 $ (4,405 ) (2.09 )% 19.65 % 111bp 200bp 209,839 (1,000 ) (0.47 ) 19.45 91bp 100bp 211,505 666 0.32 19.09 55bp Static 210,839 - - 18.54 0bp (100)bp 209,270 (1,569 ) (0.74 ) 17.94 (60)bp (200)bp 204,705 (6,134 ) (2.91 ) 17.10 (144)bp (300)bp 191,171 (19,668 ) (9.33 ) 15.61 (293)bp 54 The previous tables indicate that at December 31, 2024 the Company would expect an increase in its EVE in the event of a sudden and sustained 100, 200 and 300 basis point increase in prevailing interest rates and a decrease in its EVE in the event of a sudden and sustained 100, 200 and 300 basis point decrease in prevailing interest rates.
See Note 12 of the accompanying Notes to Consolidated Financial Statements for additional details on the Company’s income tax expense. Results of Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net Income.
See Note 12 of the accompanying Notes to Consolidated Financial Statements for additional details on the Company’s income tax expense. Average Balances and Yields .
There were no changes in the valuation techniques and related inputs used during the year ended December 31, 2023. Selected Financial Data. The consolidated financial data presented below is qualified in its entirety by the more detailed financial data appearing elsewhere in this report, including the Company's audited consolidated financial statements.
The consolidated financial data presented below is qualified in its entirety by the more detailed financial data appearing elsewhere in this report, including the Company's audited consolidated financial statements.
Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses increased from $950,000 for 2022 to $1.1 million for 2023 primarily due to loan growth and increased net charge-offs. Total loans outstanding increased $57.7 million during 2023 in addition to the $75.3 increase in 2022.
The use of the modified retrospective method of adoption resulted in the Company recording a $529,000 reduction (net of tax) in retained earnings as of January 1, 2023. 47 Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses increased from $950,000 for 2022 to $1.1 million for 2023 primarily due to loan growth and increased net charge-offs.
In addition, total nonperforming assets (consisting of nonperforming loans and foreclosed real estate) increased slightly from $1.5 million, or 0.13% of total assets, at December 31, 2022 to $1.8 million, or 0.15% of total assets, at December 31, 2023.
In addition, total nonperforming assets (consisting of nonperforming loans and foreclosed real estate) increased from $1.8 million, or 0.15% of total assets, at December 31, 2023 to $4.4 million, or 0.37% of total assets, at December 31, 2024. The increase was primarily due to the nonaccrual classification of two commercial loan relationships totaling $2.6 million.
Net interest income increased $4.0 million, or 14.2%, from $28.3 million for 2021 to $32.3 million for 2022 primarily due to increases in the average balance of interest-earning assets and the interest rate spread, the difference between the average tax-equivalent yield on interest-earning assets and the average cost of interest-bearing liabilities.
Net interest income increased $1.2 million, or 3.5%, from $34.6 million for 2023 to $35.8 million for 2024 primarily due to increases in the average tax-equivalent yield on interest-earning assets partially offset by increases in the average balance and cost of interest-bearing liabilities. Total interest income increased $6.9 million for 2024 as compared to 2023.
Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged-off.
Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged-off. The Company utilizes the Weighted Average Remaining Maturity method, which uses average annual charge-off rates and the remaining life of the loan, to estimate the ACL.
During 2023, noninterest-bearing demand deposits, savings accounts and interest-bearing demand deposit accounts (including money market accounts) decreased $49.3 million, $42.4 million and $19.2 million, respectively. Time deposits increased by $75.7 million during 2023. At December 31, 2023, the Company had $21.5 million in borrowings outstanding from the FRB under the BTFP.
This increase was partially offset by decreases in noninterest-bearing demand deposits, savings accounts and interest-bearing demand deposit accounts (including money market accounts) of $7.5 million, $14.9 million and $10.6 million, respectively. Included in time deposits at December 31, 2024 were $20.2 million in brokered deposits. The Company had no outstanding brokered deposits at December 31, 2023.
Tax expense increased $80,000 for 2022 to $2.3 million primarily due to an increase in pre-tax income. As a result, the effective tax rate decreased slightly from 16.4% for 2021 to 16.3% for 2022. See Note 12 of the accompanying Notes to Consolidated Financial Statements for additional details on the Company’s income tax expense. Average Balances and Yields .
Income tax expense decreased $32,000 for 2024 as compared to 2023 resulting in an effective tax rate of 15.6% for 2024, compared to 14.9% for 2023. See Note 12 of the accompanying Notes to Consolidated Financial Statements for additional details on the Company’s income tax expense.
These fees totaled $34,000 during 2022 compared to $2.0 million during 2021. Interest and dividends on investment securities (including FHLB stock) increased $2.4 million for 2022 compared to 2021 due to an increase in the average balance of investment securities from $364.0 million for 2021 to $495.6 million for 2022.
Interest and dividends on investment securities (including FHLB stock) increased $567,000 for 2024 compared to 2023 due to an increase in the tax-equivalent yield on investment securities from 1.95% in 2023 to 2.25% in 2024, partially offset by a decrease in the average balance of investment securities from $506.5 million for 2023 to $455.1 million for 2024.
Other interest income increased $944,000 for 2022 as compared to 2021 primarily due to the tax equivalent yield of federal funds sold increasing from 0.13% to 1.24% when comparing the two periods, partially offset by a decrease in the average balance of federal funds sold from $149.9 million for 2021 to $92.0 million for 2022. 47 Total interest expense increased $466,000, from $1.1 million for 2021 to $1.6 million for 2022, due to increases in the average cost of interest-bearing liabilities from 0.15% for 2021 to 0.20% for 2022 and in the average balance of interest-bearing liabilities from $734.5 million for 2021 to $802.8 million for 2022.
Other interest income increased $1.4 million for 2024 as compared to 2023 primarily due to an increase in the average balance of federal funds sold from $19.5 million in 2023 to $45.6 million in 2024 in addition to, the tax equivalent yield of federal funds sold increasing from 5.07% to 5.17% when comparing the two periods.
The tax-equivalent yield on interest-earning assets increased from 2.95% in 2021 to 3.10% in 2022, primarily due to the increase in short-term interest rates by the Federal Open Market Committee during 2022.
The increase was primarily due to an increase in the tax-equivalent yield on interest-earning assets increased from 3.96% in 2023 to 4.49% in 2024. The increase in the yield was primarily due to an increase in the tax-equivalent yield on loans from 5.66% 2023 to 6.05% in 2024.
Cash and cash equivalents decreased from $66.3 million at December 31, 2022 to $38.7 million at December 31, 2023, as liquidity was used to fund loan growth and the Bank experienced net deposit outflows. Total deposits decreased $35.2 million to $1.03 billion at December 31, 2023.
Cash and cash equivalents increased from $38.7 million at December 31, 2023 to $105.9 million at December 31, 2024, primarily due to inflows from available for sale security proceeds and deposit increases. Total deposits increased $41.2 million to $1.07 billion at December 31, 2024. During 2024, time deposits increased $74.3 million.
Removed
The Company utilizes a combination of methods in determining expected future credit losses, including the Open Pool/Snapshot method, which starts with a loan portfolio’s composition at a point in time and tracks that portfolio’s performance in subsequent periods until final disposition, and the Weighted Average Remaining Maturity method, which uses average annual charge-off rates and the remaining life of the loan to estimate the ACL.
Added
Loans in the relationships are secured by a variety of real estate and business assets.
Removed
In the ordinary course of business, management applies various valuation methodologies to assets and liabilities that often involve a significant degree of judgment, particularly when active markets do not exist for the items being valued. Generally, in evaluating various assets for potential impairment, management compares the fair value to the carrying value.
Added
Interest on loans increased $4.9 million when comparing the two periods due to an increase in the average balance of loans from $590.6 million in 2023 to $634.0 million in 2024. In addition, the Company’s lower yielding securities continue to mature with proceeds being reinvested in higher yielding loans or federal funds sold.
Removed
Quoted market prices are referred to when estimating fair values for certain assets, such as certain investment securities. For investment securities for which quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service.
Added
Total interest expense increased $5.7 million, from $9.0 million for 2023 to $14.7 million for 2024, due to increases in the average cost of interest-bearing liabilities from 1.11% for 2023 to 1.73% for 2024 and in the average balance of interest-bearing liabilities from $809.2 million for 2023 to $850.0 million for 2024.
Removed
However, for those items for which market-based prices do not exist and an independent pricing service is not readily available, management utilizes significant estimates and assumptions to value such items. Examples of these items include goodwill and other intangible assets, acquired loans and deposits, foreclosed and other repossessed assets, collateral dependent loans, stock-based compensation and certain other financial investments.
Added
The Company’s average balance of interest-bearing deposits increased from $794.4 million for 2023 to $820.4 million for 2024 in addition to the average cost of interest-bearing deposits increasing from 1.04% for 2023 to 1.61% for 2024.
Removed
The use of different assumptions could produce significantly different results, which could have material positive or negative effects on the Company’s results of operations. Note 19 of the accompanying Notes to Consolidated Financial Statements describes the methodologies used to determine the fair value of investment securities, collateral dependent loans, loans held for sale and foreclosed real estate.
Added
The Company’s average balance of outstanding advances from the FHLB decreased from $6.1 million for 2023 to $1.7 million for 2024, partially offset by an increase in the average rate on outstanding advances from the FHLB from 5.59% for 2023 to 5.70% for 2024.
Removed
The use of the modified retrospective method of adoption resulted in the Company recording a $529,000 reduction (net of tax) in retained earnings as of January 1, 2023.
Added
The Company’s average outstanding borrowings under the Federal Reserve Bank’s BTFP increased from $8.6 million for 2023 to $27.9 million for 2024, partially offset by a decrease in the average rate on outstanding borrowings under the Federal Reserve Bank’s BTFP from 5.05% for 2023 to 4.85% for 2024. For further information, see “ Average Balances and Yields ” below.
Removed
Total interest income increased $4.5 million for 2022 as compared to 2021. The increase was primarily due to an increase in the average balance of interest-earning assets from $1.02 billion in 2021 to $1.13 billion in 2022.
Added
Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses increased from $1.1 million for 2023 to $1.4 million for 2024 primarily due to loan growth, an increase in nonperforming assets during the year, as well as management’s consideration of macroeconomic uncertainty.
Removed
Interest on loans increased $1.2 million when comparing the two periods due to an increase in the average balance of loans from $498.5 million in 2021 to $530.2 million in 2022. This increase was partially offset by a decrease in PPP loan fees recognized in interest income during 2022.
Added
The Bank recognized net charge-offs of $173,000 for 2024 compared to $469,000 for 2023. In addition, nonperforming loans increased from $1.8 million at December 31, 2023 to $4.4 million at December 31, 2024. The increase was primarily due to the nonaccrual classification of two commercial loan relationships totaling $2.6 million.
Removed
As a result of the changes in interest-earning assets and interest-bearing liabilities, the interest rate spread (tax equivalent basis) increased from 2.80% for 2021 to 2.90% for 2022. For further information, see “ Average Balances and Yields ” below.
Added
Loans in these relationships are secured by a variety of real estate and business assets. Noninterest Income . Noninterest income increased $24,000 for 2024 as compared to 2023 primarily due to increases in gains on the sale of loans and service charges on deposit accounts of $133,000 and $59,000, respectively.
Removed
Based on management’s analysis of the allowance for loan losses, a provision for loan losses of $950,000 was recognized for 2022 primarily due to loan growth. The Company recognized a negative provision for losses of $325,000 for 2021 primarily to reflect changes to qualitative factors within the Bank’s allowance for loan losses calculation related to the COVID-19 pandemic.
Added
These were partially offset by the Company recognizing a $374,000 loss on equity securities during the year ended December 31, 2024 compared to a $207,000 loss during the same period in 2023. Noninterest Expense . Noninterest expenses increased $1.8 million for 2024 as compared to 2023.
Removed
Total outstanding loans increased by $75.3 million during 2022 as compared to a decrease of $18.4 million during 2021. Net charge-offs increased from $217,000 for 2021 to $261,000 for 2022, and nonperforming loans increased from $1.3 million at December 31, 2021 to $1.5 million at December 31, 2022.
Added
This was primarily due to increases in professional fees, compensation and benefits, and other expenses of $663,000, $536,000 and $260,000, respectively, when comparing the two periods. The increase in professional fees is primarily due to increased costs associated with the Company’s annual audit and fees being accrued for the Company’s ongoing core contract negotiations.

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