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The decrease in earnings is primarily due to increases in the provision for loan losses and in noninterest expense.
Net interest income after provision for loan losses decreased $2.2 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. Interest income decreased $2.2 million when comparing the two periods as the average tax-equivalent yield of interest-earning assets decreased from 6.33% during the nine months ended September 30, 2008 to 5.60% for the same period in 2009. This yield reduction was primarily caused by a general decline in market interest rates. Interest expense decreased $2.1 million as the average cost of interest-bearing liabilities decreased from 3.03% to 2.28% when comparing the same two periods. The provision for loan losses increased from $1.3 million during the nine months ended September 30, 2008 to $3.4 million for the nine months ended September 30, 2009. This increase was primarily to allocate specific reserves of $1.6 million on two commercial loan relationships totaling $4.6 million, which are secured by commercial real estate and equipment, as well as to adjust for weakened general economic conditions such as depreciating collateral values, job losses and continued pressures on household budgets in the Bank's market area. The Bank has also established specific reserves of $550,000 on impaired residential mortgage loans, which totaled $1.9 million at September 30, 2009, in recognition of declining home values in its market area.
Noninterest income decreased $167,000 for the nine months ended September 30, 2009 as compared to the same period in 2008. Service charges on deposit accounts decreased $206,000 when comparing the two periods. This was partially offset by an increase of $71,000 in gains on the sale of mortgage loans as the Bank originated and sold $36.5 million of mortgage loans into the secondary market during the nine months ended September 30, 2009 compared to $25.3 million during the same period in 2008.
Noninterest expenses increased $1.5 million as compared to the nine months ended September 30, 2008. Other operating expenses increased $771,000 when comparing the nine months ended September 30, 2009 and September 30, 2008. The increase in other operating expenses was primarily due to a $600,000 increase in FDIC deposit insurance premiums. This included the special assessment imposed on all banks by the FDIC effective June 30, 2009. The Bank's special assessment was $205,000. Data processing expenses increased $514,000 when comparing the two periods. This increase was primarily due to an increase of $444,000 in ATM processing fees. A substantial portion of this increase includes disputed fees for which the Bank is seeking a possible partial refund.
For the quarter ended September 30, 2009, the Company earned net income of $10,000, or less than $0.01 per diluted share, compared to net income of $803,000 or $0.29 for the same period in 2008.
Net interest income after provision for loan loss decreased $555,000 during the quarter ended September 30, 2009 compared to the same period in 2008. Interest income decreased $698,000 when comparing the two periods, due to a decrease in the average tax-equivalent yield on interest-earning assets from 6.36% during the quarter ended September 30, 2008 to 5.54% in the same period of 2009 primarily due to the general decline in market interest rates. Interest expense decreased $521,000 as the average cost of interest-bearing liabilities decreased from 2.81% to 2.16% when comparing the same two periods. The provision for loan losses increased from $602,000 for the quarter ended September 30, 2008 to $980,000 for the same period in 2009 primarily due to the establishment of specific reserves on impaired residential mortgage loans previously mentioned.
Noninterest income decreased $66,000 for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008. The decrease was primarily due to a $69,000 decrease in service charges on deposits.
Noninterest expenses increased $854,000 when comparing the three months ended September 30, 2009 to the same period in 2008, primarily due to an increase in data processing expenses of $475,000. The increase in ATM processing fees previously mentioned was $438,000 when comparing the two periods. Other operating expenses increased $272,000 when comparing the three month periods ended September 30, 2009 and September 30, 2008. FDIC deposit insurance premiums increased $155,000 while expenses related to the maintenance and sale of foreclosed real estate properties increased $89,000 when comparing the two periods.
Total assets as of September 30, 2009 were $456.6 million compared to $458.6 million at December 31, 2008. Cash and cash equivalents and net loans receivable decreased $5.2 million and $3.3 million, respectively, while securities available for sale increased $5.9 million. Federal Home Loan Bank advances decreased $15.1 million while deposits increased $12.7 million during the same period. At September 30, 2009, the Bank was considered well-capitalized under applicable federal regulatory capital guidelines.
First Harrison Bank recently added its thirteenth office with the opening of the Lanesville, Indiana location. This is added to the twelve offices in the Indiana communities of Corydon, Edwardsville, Greenville, Floyds Knobs, Hardinsburg, Palmyra, New Albany, New Salisbury, Jeffersonville and Salem. Access to First Harrison Bank accounts, including online banking and electronic bill payments, is available anywhere with Internet access through the Bank's website at www.firstharrison.com. First Harrison Financial Services, a division of the Bank, offers non-FDIC insured investments to compliment the Bank's offering of traditional banking products and services.
This release may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.
Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.
FIRST CAPITAL, INC. AND SUBSIDIARY
Consolidated Financial Highlights (Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
OPERATING DATA 2009 2008 2009 2008
(Dollars in thousands, ---------- ---------- ---------- ----------
except per share data)
Total interest income $ 17,323 $ 19,527 $ 5,708 $ 6,406
Total interest expense 6,263 8,322 1,985 2,506
--------------------- ---------------------
Net interest income 11,060 11,205 3,723 3,900
Provision for loan
losses 3,364 1,340 980 602
--------------------- ---------------------
Net interest income
after provision for
loan losses 7,696 9,865 2,743 3,298
Total non-interest
income 2,562 2,729 862 928
Total non-interest
expense 10,392 8,852 3,923 3,069
--------------------- ---------------------
Income (loss) before
income taxes (134) 3,742 (318) 1,157
Income tax expense
(benefit) (551) 1,151 (331) 354
--------------------- ---------------------
Net income $ 417 $ 2,591 $ 13 $ 803
Less net income
attributable to the
noncontrolling interest 9 -- 3 --
--------------------- ---------------------
Net income attributable
to First Capital, Inc. $ 408 $ 2,591 $ 10 $ 803
===================== =====================
Net income per share
attributable to First
Capital, Inc. common
shareholders:
Basic $ 0.15 $ 0.92 $ -- $ 0.29
===================== =====================
Diluted $ 0.15 $ 0.92 $ -- $ 0.29
===================== =====================
Weighted average common
shares outstanding:
Basic 2,775,076 2,803,220 2,761,357 2,800,598
Diluted 2,788,576 2,817,404 2,776,887 2,813,895
OTHER FINANCIAL DATA
Cash dividends per share 0.54 0.53 0.18 0.18
Return on average assets
(annualized) 0.12% 0.77% 0.01% 0.73%
Return on average equity
(annualized) 1.15% 7.42% 0.08% 6.90%
Net interest margin 3.56% 3.69% 3.66% 3.92%
Net overhead expense as
a percentage of average
assets (annualized) 3.05% 2.61% 3.45% 2.78%
BALANCE SHEET Sept. 30, Dec. 31,
INFORMATION 2009 2008
---------- ----------
Cash and cash
equivalents $ 16,940 $ 22,149
Investment securities 88,729 82,819
Gross loans 323,255 325,047
Allowance for loan
losses 4,172 2,662
Earning assets 421,091 417,938
Total assets 456,626 458,625
Deposits 368,628 355,891
FHLB debt 32,776 47,830
Repurchase agreements 5,826 4,552
Stockholders' equity,
net of noncontrolling
interest 46,624 47,522
Non-performing assets:
Nonaccrual loans 7,994 4,441
Accruing loans past
due 90 days 1,157 1,092
Foreclosed real estate 845 881
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: First Capital, Inc.
CONTACT: First Capital, Inc. Chris Frederick, Chief Financial Officer 812-734-3464
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