10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________________ to__________________

Commission File No. 0-25023

First Capital, Inc.

(Exact name of registrant as specified in its charter)

Indiana	35-2056949
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

220 Federal Drive NW, Corydon, Indiana  47112	1-812-738-2198
(Address of principal executive offices, zip code, telephone number)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X    No ____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    X    No _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check one):    Large Accelerated Filer ___    Accelerated Filer   X     Non-accelerated Filer ___

Smaller Reporting Company ___    Emerging Growth Company ___

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No    X   

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 3,356,964 shares of common stock were outstanding as of April 27, 2018.

FIRST CAPITAL, INC.

INDEX

Part I	Financial Information	Page
	Item 1. Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 (unaudited)	3
	Consolidated Statements of Income for the three months ended March 31, 2018 and 2017 (unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2018 and 2017 (unaudited)	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8-38
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39-43
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	44-47
	Item 4. Controls and Procedures	47
Part II	Other Information
	Item 1. Legal Proceedings	48
	Item 1A. Risk Factors	48
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48
	Item 3. Defaults Upon Senior Securities	48
	Item 4. Mine Safety Disclosures	48
	Item 5. Other Information	48
	Item 6. Exhibits	49
Signatures

- 2 -

PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2018			December 31, 2017
	(In thousands)
ASSETS
Cash and due from banks	$	15,298		$	19,478
Interest bearing deposits with banks		2,644			730
Federal funds sold		21,543			5,707
Total cash and cash equivalents		39,485			25,915
Interest-bearing time deposits		8,019			9,258
Securities available for sale, at fair value		264,843			271,172
Securities-held to maturity		-			1
Loans, net		407,279			409,618
Loans held for sale		2,141			2,630
Federal Home Loan Bank and other stock, at cost		1,979			1,979
Foreclosed real estate		3,809			3,971
Premises and equipment		14,806			15,031
Accrued interest receivable		2,650			2,694
Cash value of life insurance		8,322			7,279
Goodwill		6,472			6,472
Core deposit intangible		1,076			1,112
Other assets		6,443			1,824
Total Assets	$	767,324		$	758,956
LIABILITIES
Deposits:
Noninterest-bearing	$	139,111		$	129,828
Interest-bearing		542,460			534,734
Total deposits		681,571			664,562
Advances from Federal Home Loan Bank		-			10,000
Accrued interest payable		98			107
Accrued expenses and other liabilities		6,209			3,237
Total liabilities		687,878			677,906
EQUITY
Preferred stock of $.01 par value per share
Authorized 1,000,000 shares; none issued		-			-
Common stock of $.01 par value per share Authorized 7,500,000 shares; issued 3,782,933 shares (3,762,933 in 2017); outstanding 3,356,964 shares (3,336,964 in 2017)		38			38
Additional paid-in capital		40,263			39,515
Retained earnings-substantially restricted		53,333			51,972
Unearned stock compensation		(911	)		(212	)
Accumulated other comprehensive loss		(5,077	)		(2,060	)
Less treasury stock, at cost - 425,969 shares		(8,315	)		(8,315	)
Total First Capital, Inc. stockholders' equity		79,331			80,938
Noncontrolling interest in subsidiary		115			112
Total equity		79,446			81,050
Total Liabilities and Equity	$	767,324		$	758,956

See accompanying notes to consolidated financial statements.

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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended
	March 31,
	2018		2017
INTEREST INCOME	(In thousands, except per share data)
Loans, including fees	$	5,301	$	4,947
Securities:
Taxable		952		933
Tax-exempt		378		329
Dividends		33		17
Other interest income		100		117
Total interest income		6,764		6,343
INTEREST EXPENSE
Deposits		321		359
Advances from Federal Home Loan Bank		21		-
Total interest expense		342		359
Net interest income		6,422		5,984
Provision for loan losses		197		211
Net interest income after provision for loan losses		6,225		5,773
NONINTEREST INCOME
Service charges on deposit accounts		1,109		1,001
Commission and fee income		88		114
Gain on sale of securities available for sale.		1		-
Gain on sale of loans		240		257
Increase in cash value of life insurance		43		41
Other income		45		40
Total noninterest income		1,526		1,453
NONINTEREST EXPENSE
Compensation and benefits		2,894		2,720
Occupancy and equipment		413		381
Data processing		744		648
Professional fees		178		163
Advertising		85		100
Net loss on foreclosed real estate		121		311
Other expenses		819		832
Total noninterest expense		5,254		5,155
Income before income taxes		2,497		2,071
Income tax expense		361		515
Net Income		2,136		1,556
Less: net income attributable to the noncontrolling interest in subsidiary		3		3
Net Income Attributable to First Capital, Inc.	$	2,133	$	1,553
Earnings per common share attributable to First Capital, Inc.:
Basic	$	0.64	$	0.46
Diluted	$	0.64	$	0.46
Dividends per share on common shares	$	0.23	$	0.21

See accompanying notes to consolidated financial statements.

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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
	(In thousands)
Net Income	$	2,136		$	1,556
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period		(4,015	)		753
Income tax (expense) benefit		999			(288	)
Net of tax amount		(3,016	)		465
Less:reclassification adjustment for realized gains included in net income		(1	)		-
Income tax expense		-			-
Net of tax amount		(1	)		-
Other Comprehensive Income (Loss), net of tax		(3,017	)		465
Comprehensive Income (Loss)		(881	)		2,021
Less: comprehensive income attributable to the noncontrolling interest in subsidiary		3			3
Comprehensive Income (Loss) Attributable to First Capital, Inc.	$	(884	)	$	2,018

See accompanying notes to consolidated financial statements.

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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share and per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Unearned Stock Compensation			Treasury Stock			Noncontrolling Interest		Total
Balances at January 1, 2017	$	38	$	39,515	$	47,051		$	(2,277	)	$	(300	)	$	(8,297	)	$	112	$	75,842
Net income		-		-		1,553			-			-			-			3		1,556
Other comprehensive income		-		-		-			465			-			-			-		465
Cash dividends		-		-		(701	)		-			-			-			-		(701	)
Stock compensation expense		-		-		-			-			21			-			-		21
Balances at March 31, 2017	$	38	$	39,515	$	47,903		$	(1,812	)	$	(279	)	$	(8,297	)	$	115	$	77,183
Balances at January 1, 2018	$	38	$	39,515	$	51,972		$	(2,060	)	$	(212	)	$	(8,315	)	$	112	$	81,050
Net income		-		-		2,133			-			-			-			3		2,136
Other comprehensive loss		-		-		-			(3,017	)		-			-			-		(3,017	)
Cash dividends		-		-		(772	)		-			-			-			-		(772	)
Restricted stock grants		-		748		-			-			(748	)		-			-		0
Stock compensation expense		-		-		-			-			49			-			-		49
Balances at March 31, 2018	$	38	$	40,263	$	53,333		$	(5,077	)	$	(911	)	$	(8,315	)	$	115	$	79,446

See accompanying notes to consolidated financial statements.

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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES	(In thousands)
Net income	$	2,136		$	1,556
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Amortization of premiums and accretion of discounts on securities, net		431			411
Depreciation and amortization expense		312			299
Deferred income taxes		(93	)		67
Stock compensation expense		49			21
Increase in cash value of life insurance		(43	)		(41	)
Gain on sale of securities		(1	)		-
Provision for loan losses		197			211
Proceeds from sales of loans		16,547			12,891
Loans originated for sale		(15,818	)		(10,552	)
Gain on sale of loans		(240	)		(257	)
Amortization of tax credit investment		82			-
Net realized and unrealized loss on foreclosed real estate		29			227
Decrease (increase) in accrued interest receivable		44			(74	)
Decrease in accrued interest payable		(9	)		(11	)
Net change in other assets/liabilities		(265	)		77
Net Cash Provided By Operating Activities		3,358			4,825
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in interest-bearing time deposits		-			(245	)
Proceeds from maturities and sales of interest-bearing time deposits		1,239			1,445
Purchase of securities available for sale		(6,326	)		(22,815	)
Proceeds from maturities of securities available for sale		520			850
Proceeds from sales of securities available for sale		1,458			-
Principal collected on mortgage-backed obligations		6,295			5,936
Investment in cash value of life insurance		(1,000	)		-
Net (increase) decrease in loans receivable		2,176			(4,304	)
Investment in tax credit entity		(436	)		-
Proceeds from sale of foreclosed real estate		99			193
Purchase of premises and equipment		(50	)		(371	)
Net Cash Provided By (Used In) Investing Activities		3,975			(19,311	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		17,009			17,009
Repayment of advances from Federal Home Loan Bank		(10,000	)		-
Dividends paid		(772	)		(701	)
Net Cash Provided By Financing Activities		6,237			16,308
Net Increase in Cash and Cash Equivalents		13,570			1,822
Cash and cash equivalents at beginning of period		25,915			45,835
Cash and Cash Equivalents at End of Period	$	39,485		$	47,657

See accompanying notes to consolidated financial statements.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.       Presentation of Interim Information

First Capital, Inc. (“Company”) is the savings and loan holding company for First Harrison Bank (“Bank”), a federal savings bank and wholly-owned subsidiary. First Harrison Investments, Inc. and First Harrison Holdings, Inc. are wholly-owned Nevada corporate subsidiaries of the Bank that jointly own First Harrison, LLC, a Nevada limited liability corporation that holds and manages an investment portfolio. First Harrison REIT, Inc. (“REIT”) is a wholly-owned subsidiary of First Harrison Holdings, Inc. that holds a portion of the Bank’s real estate mortgage loan portfolio. FHB Risk Mitigation Services, Inc. (“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 ten other third party insurance captives for which insurance may not be currently available or economically feasible in the insurance marketplace. Heritage Hill, LLC is a wholly-owned subsidiary of the Bank that holds and manages certain foreclosed real estate properties.

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”). The Conversion has been approved by both the IDFI and FDIC. After the conversion, expected to be completed in June 2018, the IDFI will become the Bank’s primary regulator and the FDIC will become the Bank’s primary federal regulator. The Conversion is not expected to affect the Bank’s clients in any way and will not affect FDIC deposit insurance on eligible accounts.

Additionally, in connection with the Conversion, the Company filed an application with the Federal Reserve Bank of St. Louis to change from a savings and loan holding company to a financial holding company. The Company has received the approval of the Federal Reserve Bank of St. Louis, and this change is expected to happen simultaneously with the Conversion discussed above.

In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary to present fairly the financial position as of March 31, 2018, and the results of operations for the three months ended March 31, 2018 and 2017 and the cash flows for the three months ended March 31, 2018 and 2017. All of these adjustments are of a normal, recurring nature. Such adjustments are the only adjustments included in the unaudited consolidated financial statements. Interim results are not necessarily indicative of results for a full year or any other period.

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and are presented as permitted by the instructions to Form 10-Q. Accordingly, they do not contain certain information included in the Company’s annual audited consolidated financial statements and related footnotes for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassifications had no effect on net income or stockholders’ equity.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2.       Investment Securities

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at March 31, 2018 and December 31, 2017 are summarized as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	111,090	$	-	$	4,345	$	106,745
Agency CMO		18,720		-		471		18,249
Other debt securities:
Agency notes and bonds		70,495		-		1,447		69,048
Municipal obligations		71,198		743		1,140		70,801
Total securities available for sale	$	271,503	$	743	$	7,403	$	264,843
December 31, 2017
Securities available for sale:
Agency mortgage-backed securities	$	114,902	$	-	$	2,253	$	112,649
Agency CMO		15,660		1		338		15,323
Other debt securities:
Agency notes and bonds		70,013		-		985		69,028
Municipal obligations		73,303		1,274		405		74,172
Total securities available for sale	$	273,878	$	1,275	$	3,981	$	271,172
Securities held to maturity:
Agency mortgage-backed securities	$	1	$	-	$	-	$	1
Total securities held to maturity	$	1	$	-	$	-	$	1

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2 – continued)

Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank (“FHLB”), which are government-sponsored enterprises.

The amortized cost and fair value of debt securities as of March 31, 2018, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

	Securities Available for Sale
	Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	15,335	$	15,241
Due after one year through five years		64,630		63,251
Due after five years through ten years		32,072		31,459
Due after ten years		29,656		29,898
		141,693		139,849
Mortgage-backed securities and CMO		129,810		124,994
	$	271,503	$	264,843

Information pertaining to investment securities available for sale with gross unrealized losses at March 31, 2018, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		36	$	31,683	$	962
Agency CMO		7		2,948		77
Agency notes and bonds		4		11,047		132
Muncipal obligations		41		21,667		502
Total less than twelve months		88		67,345		1,673
Continuous loss position more than twelve months:
Agency mortgage-backed securities		63		75,048		3,383
Agency CMO		18		11,150		394
Agency notes and bonds		19		57,501		1,315
Muncipal obligations		29		14,284		638
Total more than twelve months		129		157,983		5,730
Total securities available for sale		217	$	225,328	$	7,403

- 10 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2 – continued)

Information pertaining to investment securities available for sale with gross unrealized losses at December 31, 2017, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows. At December 31, 2017, the Company did not have any securities held to maturity with an unrealized loss.

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		37	$	37,570	$	400
Agency CMO		6		3,036		38
Agency notes and bonds		4		11,119		69
Muncipal obligations		20		10,955		83
Total less than twelve months		67		62,680		590
Continuous loss position more than twelve months:
Agency mortgage-backed securities		60		74,960		1,853
Agency CMO		18		11,801		300
Agency notes and bonds		19		57,909		916
Muncipal obligations		29		14,667		322
Total more than twelve months		126		159,337		3,391
Total securities available for sale		193	$	222,017	$	3,981

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

At March 31, 2018, the U.S. government agency debt securities, including agency notes and bonds, mortgage-backed securities and CMO, and municipal obligations in a loss position had depreciated approximately 3.2% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

While management does not anticipate any credit-related impairment losses at March 31, 2018, additional deterioration in market and economic conditions may have an adverse impact on credit quality in the future.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2 – continued)

During the three months ended March 31, 2018, the Company realized gross gains of $7,000 and gross losses of $6,000 on sales of available for sale municipal securities and U.S. government agency mortgage-backed CMO’s, respectively. During the three months ended March 31, 2017, the Company did not have any security sales.

Certain available for sale debt securities were pledged to secure public fund deposits at March 31, 2018 and December 31, 2017.

3.       Loans and Allowance for Loan Losses

The Company’s loan and allowance for loan loss policies are as follows:

Loans are stated at unpaid principal balances, less net deferred loan fees and the allowance for loan losses. The Company originates real estate mortgage, commercial business and consumer loans. A substantial portion of the loan portfolio is represented by mortgage loans to customers in the Louisville, Kentucky metropolitan statistical area (MSA). The ability of the Company’s customers to honor their loan agreements is largely dependent upon the real estate and general economic conditions in this area.

Loan origination and commitment fees, as well as certain direct costs of underwriting and closing loans, are deferred and amortized as a yield adjustment to interest income over the lives of the related loans using the interest method. Amortization of net deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The recognition of income on a loan is discontinued and previously accrued interest is reversed, when interest or principal payments become ninety (90) days past due unless, in the opinion of management, the outstanding interest remains collectible. Past due status is determined based on contractual terms. Generally, by applying the cash receipts method, interest income is subsequently recognized only as received until the loan is returned to accrual status. The cash receipts method is used when the likelihood of further loss on the loan is remote. Otherwise, the Company applies the cost recovery method and applies all payments as a reduction of the unpaid principal balance until the loan qualifies for return to accrual status. Interest income on impaired loans is recognized using the cost recovery method, unless the likelihood of further loss on the loan is remote.

A loan is restored to accrual status when all principal and interest payments are brought current and the borrower has demonstrated the ability to make future payments of principal and interest as scheduled, which generally requires that the borrower demonstrate a period of performance of at least six consecutive months.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

For portfolio segments other than consumer loans, the Company’s practice is to charge-off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons. A partial charge-off is recorded on a loan when the uncollectibility of a portion of the loan has been confirmed, such as when a loan is discharged in bankruptcy, the collateral is liquidated, a loan is restructured at a reduced principal balance, or other identifiable events that lead management to determine the full principal balance of the loan will not be repaid. A specific reserve is recognized as a component of the allowance for estimated losses on loans individually evaluated for impairment. Partial charge-offs on nonperforming and impaired loans are included in the Company’s historical loss experience used to estimate the general component of the allowance for loan losses as discussed below. Specific reserves are not considered charge-offs in management’s analysis of the allowance for loan losses because they are estimates and the outcome of the loan relationship is undetermined. At March 31, 2018, the Company had five loans on which partial charge-offs in the aggregate of $97,000 had been recorded.

Consumer loans not secured by real estate are typically charged off at 90 days past due, or earlier if deemed uncollectible, unless the loans are in the process of collection. Overdrafts are charged off after 45 days past due. Charge-offs are typically recorded on loans secured by real estate when the property is foreclosed upon.

The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the loan portfolio at the balance sheet date. Additions to the allowance for loan losses are made by the provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company uses a disciplined process and methodology to evaluate the allowance for loan losses on at least a quarterly basis that is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated for impairment or loans otherwise classified as doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the underlying discounted collateral value (or present value of estimated future cash flows) of the impaired loan is lower than the carrying value of that loan.

- 13 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The general component covers non-classified loans and classified loans that are found, upon individual evaluation, to not be impaired. Such loans are pooled by segment and losses are modeled using annualized historical loss experience adjusted for qualitative factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior five years. The Company’s historical loss experience is then adjusted by an overall loss factor weighting adjustment based on a qualitative analysis prepared by management and reviewed on a quarterly basis. The overall loss factor considers changes in underwriting standards, economic conditions, changes and trends in past due and classified loans and other internal and external factors.

Management also applies additional loss factor multiples to loans classified as watch, special mention and substandard that are not individually evaluated for impairment. The loss factor multiples for classified loans are based on management’s assessment of historical trends regarding losses experienced on classified loans in prior periods. See below for additional discussion of the qualitative factors utilized in management’s allowance for loan loss methodology at March 31, 2018 and December 31, 2017.

Management exercises significant judgment in evaluating the relevant historical loss experience and the qualitative factors. Management also monitors the differences between estimated and actual incurred loan losses for loans considered impaired in order to evaluate the effectiveness of the estimation process and make any changes in the methodology as necessary.

Management utilizes the following portfolio segments in its analysis of the allowance for loan losses: residential real estate, land, construction, commercial real estate, commercial business, home equity and second mortgage, and other consumer loans. Additional discussion of the portfolio segments and the risks associated with each segment can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

- 14 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

Values for collateral dependent loans are generally based on appraisals obtained from independent licensed real estate appraisers, with adjustments applied for estimated costs to sell the property, costs to complete unfinished or repair damaged property and other factors. New appraisals are generally obtained for all significant properties when a loan is identified as impaired, and a property is considered significant if the value of the property is estimated to exceed $200,000. Subsequent appraisals are obtained as needed or if management believes there has been a significant change in the market value of the property. In instances where it is not deemed necessary to obtain a new appraisal, management bases its impairment and allowance for loan loss analysis on the original appraisal with adjustments for current conditions based on management’s assessment of market factors and management’s inspection of the property.

At March 31, 2018 and December 31, 2017, the recorded investments in loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1.0 million and $588,000, respectively.

Loans at March 31, 2018 and December 31, 2017 consisted of the following:

(In thousands)	March 31, 2018			December 31, 2017
Real estate mortgage loans:
Residential	$	134,298		$	136,399
Land		21,248			18,198
Residential construction		31,207			28,854
Commercial real estate		95,471			100,133
Commercial real estate contruction		13,261			17,161
Commercial business loans		33,186			34,114
Consumer loans:
Home equity and second mortgage loans		49,423			49,802
Automobile loans		38,809			38,361
Loans secured by savings accounts		1,294			1,751
Unsecured loans		3,553			3,744
Other consumer loans		7,275			8,714
Gross loans		429,025			437,231
Less undisbursed portion of loans in process		(19,155	)		(25,020	)
Principal loan balance		409,870			412,211
Deferred loan origination fees, net		1,040			1,041
Allowance for loan losses		(3,631	)		(3,634	)
Loans, net	$	407,279		$	409,618

- 15 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table provides the components of the Company’s recorded investment in loans at March 31, 2018:

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	134,298	$	21,248	$	25,313		$	95,471		$	33,186	$	49,423	$	50,931	$	409,870
Accrued interest receivable		494		72		48			221			98		185		190		1,308
Net deferred loan origination fees and costs		91		16		(7	)		(41	)		1		980		-		1,040
Recorded investment in loans	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,803	$	94	$	-		$	365		$	319	$	91	$	8	$	3,680
Collectively evaluated for impairment		131,727		21,242		25,354			95,239			32,966		50,497		51,113		408,138
Acquired with deteriorated credit quality		353		-		-			47			-		-		-		400
Ending balance	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218

- 16 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table provides the components of the Company’s recorded investment in loans at December 31, 2017:

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,399	$	18,198	$	20,995		$	100,133		$	34,114	$	49,802	$	52,570	$	412,211
Accrued interest receivable		474		94		49			249			87		189		223		1,365
Net deferred loan origination
fees and costs		87		17		(10	)		(42	)		2		987		-		1,041
Recorded investment in loans	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,907	$	-	$	-		$	401		$	42	$	73	$	-	$	3,423
Collectively evaluated for impairment		133,703		18,309		21,034			99,891			34,161		50,905		52,793		410,796
Acquired with deteriorated credit quality		350		-		-			48			-		-		-		398
Ending balance	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617

- 17 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

An analysis of the allowance for loan losses as of March 31, 2018 is as follows:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	101	$	-	$	-	$	-	$	3	$	13	$	-	$	117
Collectively evaluated for impairment		200		156		291		1,520		273		667		407		3,514
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	301	$	156	$	291	$	1,520	$	276	$	680	$	407	$	3,631

An analysis of the allowance for loan losses as of December 31, 2017 is as follows:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	35	$	-	$	-	$	-	$	4	$	13	$	-	$	52
Collectively evaluated for impairment		182		133		245		1,622		287		697		414		3,580
Acquired with deteriorated credit quality		2		-		-		-		-		-		-		2
Ending balance	$	219	$	133	$	245	$	1,622	$	291	$	710	$	414	$	3,634

- 18 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

An analysis of the changes in the allowance for loan losses for the three months ended March 31, 2018 is as follows:

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg			Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	219		$	133	$	245	$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		139			23		46		(110	)		(15	)		(33	)		147			197
Charge-offs		(60	)		-		-		-			(1	)		-			(196	)		(257	)
Recoveries		3			-		-		8			1			3			42			57
Ending balance	$	301		$	156	$	291	$	1,520		$	276		$	680		$	407		$	3,631

An analysis of the changes in the allowance for loan losses for the three months ended March 31, 2017 is as follows:

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg		Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	380		$	56	$	80	$	1,670		$	198		$	683	$	319		$	3,386
Provisions for loan losses		(85	)		53		143		(128	)		85			14		129			211
Charge-offs		(40	)		-		-		(1	)		(43	)		-		(204	)		(288	)
Recoveries		16			-		-		44			4			1		44			109
Ending balance	$	271		$	109	$	223	$	1,585		$	244		$	698	$	288		$	3,418

- 19 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

At March 31, 2018 and December 31, 2017, management applied specific qualitative factor adjustments to various portfolio segments as they determined that the historical loss experience was not indicative of the level of risk in the remaining balance of those portfolio segments. These adjustments increased the loss factors by 0.15% to 20% for certain loan groups, and increased the estimated allowance for loan losses related to those portfolio segments by approximately $2.3 million and $2.1 million at March 31, 2018 and December 31, 2017, respectively. These changes were made to reflect management’s estimates of inherent losses in these portfolio segments at March 31, 2018 and December 31, 2017.

At March 31, 2018 and December 31, 2017, for each loan portfolio segment, management applied an overall qualitative factor of 1.18 to the Company’s historical loss factors. The overall qualitative factor is derived from management’s analysis of changes and trends in the following qualitative factors: underwriting standards, economic conditions, past due loans and other internal and external factors. Each of the four factors above was assigned an equal weight to arrive at an average for the overall qualitative factor of 1.18 at March 31, 2018 and December 31, 2017. The effect of the overall qualitative factor was to increase the estimated allowance for loan losses by $534,000 and $536,000 at March 31, 2018 and December 31, 2017, respectively. Additional discussion of the overall qualitative factor can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. There were no changes in management’s assessment of the overall qualitative factor components from December 31, 2017 to March 31, 2018.

Management also adjusts the historical loss factors for loans classified as watch, special mention and substandard that are not individually evaluated for impairment. The adjustments consider the increased likelihood of loss on classified loans based on the Company’s separate historical experience for classified loans. The effect of the adjustments for classified loans was to increase the estimated allowance for loan losses by $515,000 and $506,000 at March 31, 2018 and December 31, 2017, respectively. These factors were not adjusted during the period from December 31, 2017 to March 31, 2018.

- 20 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s impaired loans as of March 31, 2018 and for the three months ended March 31, 2018 and 2017. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the three month periods ended March 31, 2018 and 2017:

	At March 31, 2018						Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,525	$	2,760	$	-	$	2,610	$	7	$	2,010	$	8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		291		292		-		152		4		74		-
Home equity/2nd mortgage		78		86		-		69		-		230		-
Other consumer		8		8		-		4		-		6		-
		3,361		3,604		-		3,265		16		3,470		11
Loans with an allowance recorded:
Residential		278		285		101		245		-		150		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		-		-		-		-
Commercial business		28		30		3		29		-		59		-
Home equity/2nd mortgage		13		13		13		13		-		13		-
Other consumer		-		-		-		-		-		18		-
		319		328		117		287		-		240		-
Total:
Residential		2,803		3,045		101		2,855		7		2,160		8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		319		322		3		181		4		133		-
Home equity/2nd mortgage		91		99		13		82		-		243		-
Other consumer		8		8		-		4		-		24		-
	$	3,680	$	3,932	$	117	$	3,552	$	16	$	3,710	$	11

- 21 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s impaired loans as of December 31, 2017:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,695	$	2,948	$	-
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		12		12		-
Home equity/2nd mortgage		60		68		-
Other consumer		-		-		-
		3,168		3,563		-
Loans with an allowance recorded:
Residential		212		218		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		-		-		-
Commercial business		30		30		4
Home equity/2nd mortgage		13		13		13
Other consumer		-		-		-
		255		261		52
Total:
Residential		2,907		3,166		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		42		42		4
Home equity/2nd mortgage		73		81		13
Other consumer		-		-		-
	$	3,423	$	3,824	$	52

- 22 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

Nonperforming loans consists of nonaccrual loans and loans over 90 days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at March 31, 2018 and December 31, 2017:

	March 31, 2018						December 31, 2017
	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans		Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)
Residential	$	2,262	$	100	$	2,362	$	2,298	$	109	$	2,407
Land		94		-		94		-		95		95
Construction		-		-		-		-		-		-
Commercial real estate		104		-		104		139		-		139
Commercial business		139		66		205		42		59		101
Home equity/2nd mortgage		76		-		76		57		-		57
Other consumer		-		13		13		-		28		28
Total	$	2,675	$	179	$	2,854	$	2,536	$	291	$	2,827

The following table presents the aging of the recorded investment in loans at March 31, 2018:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,108	$	155	$	1,473	$	3,736	$	130,794	$	353	$	134,883
Land		381		-		94		475		20,861		-		21,336
Construction		-		-		-		-		25,354		-		25,354
Commercial real estate		-		233		104		337		95,267		47		95,651
Commercial business		156		-		124		280		33,005		-		33,285
Home equity/2nd mortgage		152		1		13		166		50,422		-		50,588
Other consumer		249		15		13		277		50,844		-		51,121
Total	$	3,046	$	404	$	1,821	$	5,271	$	406,547	$	400	$	412,218

- 23 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table presents the aging of the recorded investment in loans at December 31, 2017:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,612	$	338	$	1,255	$	4,205	$	132,405	$	350	$	136,960
Land		186		-		95		281		18,028		-		18,309
Construction		-		-		-		-		21,034		-		21,034
Commercial real estate		379		-		139		518		99,774		48		100,340
Commercial business		46		49		102		197		34,006		-		34,203
Home equity/2nd mortgage		468		27		13		508		50,470		-		50,978
Other consumer		420		37		28		485		52,308		-		52,793
Total	$	4,111	$	451	$	1,632	$	6,194	$	408,025	$	398	$	414,617

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and of such little value that their continuance on the institution’s books as an asset is not warranted.

Loans not meeting the criteria above that are analyzed individually as part of the described process are considered to be pass rated loans.

- 24 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table presents the recorded investment in loans by risk category as of the date indicated:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
March 31, 2018
Pass	$	131,433	$	21,109	$	25,125	$	92,367	$	32,287	$	50,510	$	50,966	$	403,797
Special Mention		395		83		229		1,347		786		-		152		2,992
Substandard		778		50		-		1,833		73		2		3		2,739
Doubtful		2,277		94		-		104		139		76		-		2,690
Loss		-		-		-		-		-		-		-		-
Total	$	134,883	$	21,336	$	25,354	$	95,651	$	33,285	$	50,588	$	51,121	$	412,218
December 31, 2017
Pass	$	133,618	$	18,003	$	20,173	$	97,219	$	33,245	$	50,919	$	52,629	$	405,806
Special Mention		348		157		861		1,362		734		-		161		3,623
Substandard		684		149		-		1,620		182		2		3		2,640
Doubtful		2,310		-		-		139		42		57		-		2,548
Loss		-		-		-		-		-		-		-		-
Total	$	136,960	$	18,309	$	21,034	$	100,340	$	34,203	$	50,978	$	52,793	$	414,617

- 25 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s troubled debt restructurings (TDRs) by accrual status as of March 31, 2018 and December 31, 2017:

	March 31, 2018								December 31, 2017
	Accruing		Nonaccrual		Total		Related Allowance for Loan Losses		Accruing		Nonaccrual		Total		Related Allowance for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	484	$	106	$	590	$	-	$	487	$	106	$	593	$	-
Commercial real estate		354		-		354		-		356		-		356		-
Commercial business		179		-		179		-		-		-		-		-
Home equity and 2nd mortgage		15		-		15		-		15		-		15		-
Total	$	1,032	$	106	$	1,138	$	-	$	858	$	106	$	964	$	-

At March 31, 2018 and December 31, 2017, there were no commitments to lend additional funds to debtors whose loan terms have been modified in a TDR.

The following table summarizes information in regard to TDRs that were restructured during the three months ended March 31, 2018:

	Three months ended March 31, 2018
	Number of Contracts		Pre-Modifcation Outstanding Balance		Post-Modifcation Outstanding Balance
	(Dollars in thousands)
Troubled debt restructurings:
Commercial Business		1	$	179	$	179
Total		1	$	179	$	179

For the TDR listed above, the terms of modification included the deferral of contractual principal payments. There were no TDRs that were restructured during the three months ended March 31, 2017.

There were no principal charge-offs recorded as a result of TDRs and there was no specific allowance for loan losses related to TDRs modified during the three months ended March 31, 2018 or 2017.

- 26 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

There were no TDRs modified within the previous 12 months for which there was a subsequent payment default (defined as the loan becoming more than 90 days past due, being moved to nonaccrual status, or the collateral being foreclosed upon) during the three months ended March 31, 2018 and 2017. In the event that a TDR subsequently defaults, the Company evaluates the restructuring for possible impairment. As a result, the related allowance for loan losses may be increased or charge-offs may be taken to reduce the carrying amount of the loan.

Purchased Credit Impaired (PCI) Loans

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. Such loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as credit score, loan type and date of origination. In determining the estimated fair value of purchased loans or pools, management considers a number of factors including the remaining life, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, and net present value of cash flows expected to be received, among others. Purchased loans that have evidence of credit deterioration since origination for which it is deemed probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-30. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. The difference between the expected cash flows and the fair value at acquisition is recorded as interest income over the remaining life of the loan or pool of loans and is referred to as the accretable yield. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which is recognized as future interest income.

The following table presents the carrying amount of PCI loans accounted for under ASC 310-30 at March 31, 2018 and December 31, 2017:

(In thousands)	March 31, 2018		December 31, 2017
Residential real estate	$	353	$	350
Commercial real estate		47		48
Carrying amount		400		398
Allowance for loan losses		0		2
Carrying amount, net of allowance	$	400	$	396

The outstanding balance of PCI loans accounted for under ASC 310-30, including contractual principal, interest, fees and penalties was $617,000 and $625,000 at March 31, 2018 and December 31, 2017, respectively.

There was no allowance for loan losses related to PCI loans at March 31, 2018. The allowance for loan losses related to PCI loans was $2,000 at December 31, 2017. There was a $2,000 reduction of the allowance for loan losses related to PCI loans for the three-month period ended March 31, 2018. There were no net provisions for loan losses related to PCI loans for the three-month period ended March 31, 2017.

- 27 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

Accretable yield, or income expected to be collected, is as follows for the three month periods ended March 31, 2018 and 2017:

	2018			2017
Balance at beginning of period	$	470		$	252
New loans purchased		-			-
Accretion to income		(14	)		(14	)
Disposals and other adjustments		-			-
Reclassification from nonaccretable difference		3			6
Balance at end of period	$	459		$	244

4.       Qualified Affordable Housing Project Investment

On January 19, 2018, the Bank entered into an agreement to invest in qualified affordable housing projects through a limited liability company. At March 31, 2018, the balance of the Bank’s investment was $3.9 million and is reflected in other assets on the consolidated balance sheet. The unfunded commitment related to the qualified affordable housing project investment was $3.5 million at March 31, 2018 and is reflected in other liabilities on the consolidated balance sheet. The Bank expects to fulfill the commitment as capital calls are made through 2029.

The investment is accounted for using the proportional amortization method. During the three months ended March 31, 2018, the Bank recognized amortization expense of $82,000, which was included in income tax expense on the consolidated statement of income. Additionally, during the three months ended March 31, 2018, the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of $98,000.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5.       Supplemental Disclosure for Earnings Per Share

	Three Months Ended March 31,
	2018		2017
(Dollars in thousands, exept per share data)
Basic
Earnings:
Net income attributable to First Capital, Inc.	$2,133		$1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Net income attributable to First Capital, Inc. per common share, basic	$	0.64	$	0.46
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,133	$	1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Add: Dilutive effect of restricted stock		5,671		5,070
Weighted average common shares outstanding, as adjusted		3,332,135		3,347,122
Net income attributable to First Capital, Inc. per common share, diluted	$	0.64	$	0.46

Nonvested restricted stock shares are not considered as outstanding for purposes of computing weighted average common shares outstanding. No shares were excluded from the calculations of diluted net income per share because their effect would be anti-dilutive for the three-month periods ended March 31, 2018 and 2017.

6.       Stock Option Plan

On May 20, 2009, the Company adopted the 2009 Equity Incentive Plan (the “Plan”). The Plan provides for the award of stock options, restricted stock, performance shares and stock appreciation rights. The aggregate number of shares of the Company’s common stock available for issuance under the Plan may not exceed 223,000 shares.

- 29 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(6 – continued)

At March 31, 2018, 184,000 shares of the Company’s common stock were available for issuance under the Plan. The Company may grant both non-statutory and statutory stock options which may not have a term exceeding ten years. In the case of incentive stock options, the aggregate fair value of the stock (determined at the time the incentive stock option is granted) for which any optionee may be granted incentive options which are first exercisable during any calendar year shall not exceed $100,000. Option prices may not be less than the fair market value of the underlying stock at the date of the grant. An award of a performance share is a grant of a right to receive shares of the Company’s common stock which is contingent upon the achievement of specific performance criteria or other objectives set at the grant date. Stock appreciation rights are equity or cash settled share-based compensation arrangements whereby the number of shares that will ultimately be issued or the cash payment is based upon the appreciation of the Company’s common stock. Awards granted under the Plan may be granted either alone, in addition to, or in tandem with, any other award granted under the Plan. The terms of the Plan also include provisions whereby all unearned options and restricted shares become immediately exercisable and fully vested upon a change in control.

The fair market value of stock options granted is estimated at the date of grant using an option pricing model. Expected volatilities are based on historical volatility of the Company's stock. The expected term of options granted represents the period of time that options are expected to be outstanding and is based on historical trends. The risk free rate for the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. As of March 31, 2018, no stock options had been granted under the Plan.

On February 20, 2018, the Company granted 20,000 restricted stock shares to directors, officers and key employees at a grant-date price of $37.42 per share for a total of $748,000. The restricted stock vests ratably from the grant date through July 1, 2023, with 20% of the shares vesting each year on July 1 beginning July 1, 2019. On February 17, 2015, the Company granted 19,500 restricted stock shares to directors, officers and key employees at a grant-date price of $24.50 per share for a total of $478,000 with a similar vesting schedule from July 1, 2016 through July 1, 2020. Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). Compensation expense related to restricted stock recognized for the three-month periods ended March 31, 2018 and 2017 amounted to $49,000 and $21,000, respectively.

A summary of the Company’s nonvested restricted shares under the Plan as of March 31, 2018 and changes during the three-month period then ended is presented below.

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2018		10,500	$	24.50
Granted		20,000	$	37.42
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2018		30,500	$	32.97

- 30 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(6 – continued)

At March 31, 2018, there was $911,000 of total unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of 5.25 years.

7.       Supplemental Disclosures of Cash Flow Information

	Three Months Ended March 31,
	2018		2017
	(In thousands)
Cash payments for:
Interest	$	351	$	370
Taxes (net of refunds received)		0		0
Noncash investing activities:
Transfers from loans to real estate acquired through foreclosure		27		194

8. Fair Value Measurements

FASB ASC Topic 820, Fair Value Measurements, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are described as follows:

Level 1:	Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets
Level 2:	Inputs to the valuation methodology include quoted market prices for similar assets or liabilities in active markets; quoted market prices for identical or similar assets or liabilities in markets that are not active; or inputs that are derived principally from or can be corroborated by observable market data by correlation or other means.
Level 3:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth on the following page. These valuation methodologies were applied to all of the Company’s financial and nonfinancial assets carried at fair value or the lower of cost or fair value. The table below presents the balances of assets measured at fair value on a recurring and nonrecurring basis as of March 31, 2018 and December 31, 2017. The Company had no liabilities measured at fair value as of March 31, 2018 or December 31, 2017.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	106,745	$	-	$	106,745
Agency CMO		-		18,249		-		18,249
Agency notes and bonds		-		69,048		-		69,048
Municipal obligations		-		70,801		-		70,801
Total securities available for sale	$	-	$	264,843	$	-	$	264,843
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,702	$	2,702
Land		-		-		94		94
Commercial real estate		-		-		365		365
Commercial business		-		-		316		316
Home equity and second mortgage		-		-		78		78
Other consumer		-		-		8		8
Total impaired loans	$	-	$	-	$	3,563	$	3,563
Loans held for sale	$	-	$	2,141	$	-	$	2,141
Foreclosed real estate:
Residential real estate	$	-	$	-	$	281	$	281
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,809	$	3,809
December 31, 2017
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	112,649	$	-	$	112,649
Agency CMO		-		15,323		-		15,323
Agency notes and bonds		-		69,028		-		69,028
Municipal obligations		-		74,172		-		74,172
Total securities available for sale	$	-	$	271,172	$	-	$	271,172
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,872	$	2,872
Commercial real estate		-		-		401		401
Commercial business		-		-		38		38
Home equity and second mortgage		-		-		60		60
Total impaired loans	$	-	$	-	$	3,371	$	3,371
Loans held for sale	$	-	$	2,630	$	-	$	2,630
Foreclosed real estate:
Residential real estate	$	-	$	-	$	443	$	443
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,971	$	3,971

- 32 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

Fair value is based upon quoted market prices, where available. If quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters or a matrix pricing model that employs the Bond Market Association’s standard calculations for cash flow and price/yield analysis and observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value, or the lower of cost or fair value. These adjustments may include unobservable parameters. Any such valuation adjustments have been applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available for Sale. Securities classified as available for sale are reported at fair value on a recurring basis.  These securities are classified as Level 1 of the valuation hierarchy where quoted market prices from reputable third-party brokers are available in an active market. If quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service.  These securities are reported using Level 2 inputs and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.

Impaired Loans. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans is classified as Level 3 in the fair value hierarchy.

Impaired loans are carried at the present value of estimated future cash flows using the loan's effective interest rate or the fair value of collateral less estimated costs to sell if the loan is collateral dependent. At March 31, 2018 and December 31, 2017, all impaired loans were considered to be collateral dependent for the purpose of determining fair value. Collateral may be real estate and/or business assets, including equipment, inventory and/or accounts receivable. The fair value of the collateral is generally determined based on real estate appraisals or other independent evaluations by qualified professionals, adjusted for estimated costs to sell the property, costs to complete or repair the property and other factors to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral. At March 31, 2018 and December 31, 2017, the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral and estimated costs to sell the collateral ranging from 14% to 62%, with a weighted average discount of 39%. The Company recognized provisions for loan losses for impaired loans for the three months ended March 31, 2018 and March 31, 2017 of $65,000 and $2,000, respectively.

- 33 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

Loans Held for Sale. Loans held for sale are carried at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors.  These measurements are classified as Level 2.

Foreclosed Real Estate. Foreclosed real estate is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of foreclosed real estate is classified as Level 3 in the fair value hierarchy.

Foreclosed real estate is reported at fair value less estimated costs to dispose of the property. The fair values are determined by real estate appraisals which are then discounted to reflect management’s estimate of the fair value of the property given current market conditions and the condition of the collateral. At March 31, 2018, the significant unobservable inputs used in the fair value measurement of foreclosed real estate included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral and estimated costs to sell the property ranging from 10% to 76%, with a weighted average of 44%. At December 31, 2017, the discount from appraised value ranged from 17% to 75%, with a weighted average of 45%. The Company recognized losses of $228,000 to write down foreclosed real estate for the three months ended March 31, 2017. There were no charges to write down foreclosed real estate recognized in income for the three months ended March 31, 2018.

There have been no changes in the valuation techniques and related inputs used for assets measured at fair value on a recurring and nonrecurring basis during the three month periods ended March 31, 2018 and 2017. There were no transfers into or out of the Company’s Level 3 financial assets for the three month periods ended March 31, 2018 and 2017. In addition, there were no transfers into or out of Levels 1 and 2 of the fair value hierarchy during the three month periods ended March 31, 2018 and 2017.

- 34 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

GAAP requires disclosure of the fair value of financial assets and financial liabilities, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The estimated fair values of the Company's financial instruments are as follows:

	Carrying		Fair		Fair Value Measurements Using
(In thousands)	Value		Value		Level 1		Level 2		Level 3
March 31, 2018
Financial assets:
Cash and cash equivalents	$	39,485	$	39,485	$	39,485	$	-	$	-
Interest-bearing time deposits		8,019		7,944		-		7,944		-
Securities available for sale		264,843		264,843		-		264,843		-
Loans held for sale		2,141		2,186		-		2,186		-
Loans, net		407,279		402,059		-		-		402,059
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,650		2,650		-		2,650		-
Financial liabilities:
Deposits		681,571		679,700		-		-		679,700
Accrued interest payable		98		98		-		98		-
December 31, 2017:
Financial assets:
Cash and cash equivalents	$	25,915	$	25,915	$	25,915	$	-	$	-
Interest-bearing time deposits		9,258		9,220		-		9,220		-
Securities available for sale		271,172		271,172		-		271,172		-
Securities held to maturity		1		1		-		1		-
Loans held for sale		2,630		2,678		-		2,678		-
Loans, net		409,618		404,931		-		-		404,931
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,694		2,694		-		2,694		-
Financial liabilities:
Deposits		664,562		663,006		-		-		663,006
FHLB Advances		10,000		10,000		-		10,000		-
Accrued interest payable		107		107		-		107		-

- 35 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Revenue from Contracts with Customers

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. The adoption of the ASU had no material impact on the measurement or recognition of revenue; however, additional disclosures have been added in accordance with the ASU. See Note 10 for additional information on this new accounting standard.

All of the Company’s revenue from contracts with customers in the scope of FASB ASC 606 is recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2018 and 2017:

	2018		2017
Service charges on deposit accounts	$	1,109	$	1,001
Investment advisory income		88		114
Revenue from contracts with customers		1,197		1,115
Gain on sale of loans and securities		241		257
Increase in cash value of life insurance		43		41
Other		45		40
Other noninterest income		329		338
Total noninterest income	$	1,526	$	1,453

A description of the Company’s revenue streams accounted for under FASB ASC 606 follows:

Service Charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income: The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is included in service charges on deposit accounts.

Investment Advisory Income: The Company earns trust, insurance commissions, brokerage commissions and annuities income from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e., the trade date). Other related fees, which are based on a fixed fee schedule, are recognized when the services are rendered.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Recent Accounting Pronouncements

The following are summaries of recently issued or adopted accounting pronouncements that impact the accounting and reporting practices of the Company:

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards). The guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. For public entities, the guidance was originally to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, with the issuance of ASU No. 2015-14 in August 2015, the FASB deferred the effective date of ASU No. 2014-09 by one year for all entities, making the amendments effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The adoption of this update as of January 1, 2018 did not have a material impact on the Company’s consolidated financial position or results of operations. See Note 9 for further discussion.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the guidance revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The guidance also amends certain disclosure requirements associated with fair value of financial instruments. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this update as of January 1, 2018 did not have a material impact on the Company’s consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management is evaluating the new guidance, but does not expect the adoption of this update to have a material impact on the Company’s consolidated financial position or results of operations.

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FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(10 – continued)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The update replaces the incurred loss methodology for recognizing credit losses under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to-maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. For the Company, the amendments in the update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing the impact the guidance will have upon adoption, but management expects to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. In planning for the implementation of ASU 2016-13, the Company has formed a current expected credit loss (“CECL”) implementation team consisting of members of senior management that meets on a periodic basis and is currently evaluating software solutions, data requirements and loss methodologies.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in the update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period, and all amendments must be adopted in the same period. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities. The update shortens the amortization period for certain callable debt securities held at a premium. Specifically, the update requires the premium to be amortized to the earliest call date. The update does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in the update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

- 38 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

Safe Harbor Statement for Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts nor guarantees of future performance; 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 can be identified by use of the words “expects,” “believes,” “anticipates,” “intends,” “could,” “should” and similar expressions. Forward-looking statements also include, but are not limited to, statements regarding estimated cost savings, plans and objectives for future operations, and the Company’s business and growth strategies.

Numerous risks and uncertainties could cause or contribute to the Company’s actual results, performance and achievements being 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; the ability of the Company to execute its business plan; legislative and regulatory changes; the quality and composition of the loan and investment securities portfolio; loan demand; deposit flows; competition; and changes in accounting principles and guidelines. Additional factors that may affect our results are discussed in Part II of this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017 under “Item 1A. Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.

Critical Accounting Policies

During the three months ended March 31, 2018, there was no significant change in the Company’s critical accounting policies or the application of critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Financial Condition

Total assets increased $8.3 million from $759.0 million at December 31, 2017 to $767.3 million at March 31, 2018, an increase of 1.1%.

Net loans receivable (excluding loans held for sale) decreased $2.3 million from $409.6 million at December 31, 2017 to $407.3 million at March 31, 2018. Commercial real estate loans, residential mortgage loans and consumer loans decreased $4.7 million, $2.1 million and $1.6 million, respectively, during the three months ended March 31, 2018 while construction loans and land loans increased $4.3 million and $3.1 million, respectively, during the period.

- 39 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

Securities available for sale decreased $6.4 million from $271.2 million at December 31, 2017 to $264.8 million at March 31, 2018. Purchases of $6.3 million of securities classified as available for sale were made during the three months ended March 31, 2018 and consisted primarily of U.S. government agency notes and bonds and mortgage-backed securities. Principal repayments and maturities of available for sale securities totaled $6.3 million and $520,000, respectively, during the three months ended March 31, 2018. Municipal bonds and U.S. government agency mortgage-backed CMO’s with a value of $1.5 million were sold during the three months ended March 31, 2018. In addition, unrealized losses on securities available for sale increased $4.0 million during the three months ended March 31, 2018.

Cash and cash equivalents increased from $25.9 million at December 31, 2017 to $39.5 million at March 31, 2018, primarily due to excess liquidity from increases in deposit balances.

Total deposits increased from $664.6 million at December 31, 2017 to $681.6 million at March 31, 2018. Noninterest-bearing checking accounts, interest bearing checking accounts and savings accounts increased $9.3 million, $6.1 million and $5.1 million, respectively, during the three months ended March 31, 2018 primarily due to new accounts and normal balance fluctuations, while time deposits decreased $3.6 million during the period.

FHLB borrowings decreased $10.0 million from December 31, 2017 to March 31, 2018 as the Bank paid off all outstanding advances during the three-month period.

Total stockholders' equity attributable to the Company decreased from $80.9 million at December 31, 2017 to $79.3 million at March 31, 2018, primarily due to a $3.0 million increase in the net unrealized loss on available for sale securities partially offset by a $1.4 million increase in retained net income during the three months ended March 31, 2018. The increase in the net unrealized loss on available for sale securities during the period is primarily due to changes in long-term market interest rates.

Results of Operations

Net income for the three-month periods ended March 31, 2018 and 2017. Net income attributable to the Company was $2.1 million ($0.64 per diluted share) for the three months ended March 31, 2018 compared to $1.6 million ($0.46 per diluted share) for the same time period in 2017. The increase is primarily due to an increase in net interest income after provision for loan losses and a decrease in income tax expense.

Net interest income for the three-month periods ended March 31, 2018 and 2017. Net interest income increased $438,000 for the three months ended March 31, 2018 compared to the same period in 2017 primarily due to increases in the average balance and average tax-equivalent yield of interest-earning assets and a decrease in the average balance of interest-bearing liabilities.

- 40 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

Total interest income increased $421,000 for the three months ended March 31, 2018 compared to the same period in 2017. For the three months ended March 31, 2018, the average balance of interest-earning assets and their tax-equivalent yield were $710.9 million and 3.87%, respectively. During the same period in 2017, the average balance of those assets was $704.4 million and the tax-equivalent yield was 3.70%. The average tax-equivalent yield increased when comparing the two periods despite being negatively impacted by the Tax Cuts and Jobs Act (“TCJA”) signed into law on December 22, 2017 as the yield would have been 3.93% for 2018 using the 34% federal corporate tax rate in effect for 2017 as opposed to the 21% rate in effect for 2018.

Total interest expense decreased $17,000 for the three months ended March 31, 2018 compared to the same period in 2017. The average balance of interest-bearing liabilities decreased from $546.7 million for 2017 to $540.8 million for 2018. The average rate paid on interest-bearing liabilities decreased from 0.26% to 0.25% when comparing the two periods.

As a result of the changes in interest-earning assets and interest-bearing liabilities, the interest rate spread on a tax-equivalent basis increased from 3.44% for the three months ended March 31, 2017 to 3.62% for the same period in 2018.

Provision for loan losses. Based on management’s analysis of the allowance for loan losses, the provision for loan losses decreased from $211,000 for the three-month period ended March 31, 2017 to $197,000 for the same period in 2018. The Bank recognized net charge-offs of $200,000 for the three months ended March 31, 2018 compared to $179,000 during the same period in 2017.

Provisions for loan losses are charges to earnings to maintain the total allowance for loan losses at a level considered adequate by management to provide for probable known and inherent loan losses based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specified impaired loans and economic conditions. Although management uses the best information available, future adjustments to the allowance may be necessary due to changes in economic, operating, regulatory and other conditions that may be beyond the Bank’s control. While the Bank maintains the allowance for loan losses at a level that it considers adequate to provide for estimated losses, there can be no assurance that further additions will not be made to the allowance for loan losses and that actual losses will not exceed the estimated amounts.

The methodology used in determining the allowance for loan losses includes segmenting the loan portfolio by identifying risk characteristics common to groups of loans, determining and measuring impairment of individual loans based on the present value of expected future cash flows or the fair value of collateral, and determining and measuring impairment for groups of loans with similar characteristics by applying loss factors that consider the qualitative factors which may affect the loss rates.

- 41 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

The allowance for loan losses was $3.6 million at both March 31, 2018 and December 31, 2017. Management has deemed these amounts as adequate at each date based on its best estimate of probable known and inherent loan losses at each date. At March 31, 2018, nonperforming loans amounted to $2.9 million compared to $2.8 million at December 31, 2017. Included in nonperforming loans were loans 90 days or more past due and still accruing interest of $179,000 and $291,000 at March 31, 2018 and December 31, 2017, respectively. These loans were accruing interest because the estimated value of the collateral and collection efforts are deemed sufficient to ensure full recovery. At March 31, 2018 and December 31, 2017, nonaccrual loans amounted to $2.7 million and $2.5 million, respectively.

Noninterest income for the three-month periods ended March 31, 2018 and 2017. Noninterest income for the quarter ended March 31, 2018 increased $73,000 compared to the quarter ended March 31, 2017. The increase was primarily due to an increase of $108,000 in services charges on deposit accounts partially offset by a $26,000 decrease in commission and fee income.

Noninterest expense for the three-month periods ended March 31, 2018 and 2017. Noninterest expense for the quarter ended March 31, 2018 increased $99,000 compared to the quarter ended March 31, 2017. Compensation and benefits expense and data processing expense increased $174,000 and $96,000, respectively, when comparing the two periods. This was partially offset by a $190,000 decrease in net losses on foreclosed real estate.

Income tax expense. Income tax expense decreased $154,000 for the first quarter of 2018 as compared to the first quarter of 2017 primarily due to the TCJA and the Bank’s investment in a tax credit entity during the quarter ended March 31, 2018. As a result of the TCJA, anticipated tax credits from the tax credit entity and an increase in nontaxable income, the effective tax rate for the quarter ended March 31, 2018 was 14.5% as compared to 24.9% for the same period in 2017.

Liquidity and Capital Resources

The Bank’s primary sources of funds are customer deposits, proceeds from loan repayments, maturing securities and FHLB advances. While loan repayments and maturities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. At March 31, 2018, the Bank had cash and cash equivalents of $39.5 million and securities available-for-sale with a fair value of $264.8 million. If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB of Indianapolis and additional collateral eligible for repurchase agreements.

The Bank’s primary investing activity is the origination of one-to-four family mortgage loans and commercial real estate loans and, to a lesser extent, consumer, multi-family, commercial business and residential construction loans. The Bank also invests in U.S. Government and agency securities and mortgage-backed securities issued by U.S. Government agencies.

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. Historically, the Bank has been able to retain a significant amount of its deposits as they mature.

- 42 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company, on a stand-alone basis, is responsible for paying any dividends declared to its shareholders. The Board of Directors of the Company also has authorized the repurchase of shares of its common stock. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the Office of the Comptroller of the Currency (“OCC”) but with prior notice to the OCC, cannot exceed net income for that year to date plus retained net income (as defined in the applicable OCC regulations) for the preceding two calendar years. On a stand-alone basis, the Company had liquid assets of $1.9 million at March 31, 2018.

The Bank is required to maintain specific amounts of capital pursuant to regulatory requirements. As of March 31, 2018, the Bank was in compliance with all regulatory capital requirements that were effective as of such date with Tier 1 capital to average assets, common equity Tier 1 capital to risk-weighted assets, Tier 1 capital to risk-weighted assets and total capital to risk-weighted assets ratios of 9.7%, 13.8%, 13.8% and 14.5%, respectively. The regulatory requirements at that date to be considered “well-capitalized” under applicable regulations were 5.0%, 6.5%, 8.0% and 10.0%, respectively. At March 31, 2018, the Bank was considered “well-capitalized” under applicable regulatory guidelines.

Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded on the Company’s financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are primarily used to manage customers’ requests for funding and take the form of loan commitments and letters of credit. A further presentation of the Company’s off-balance sheet arrangements is presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

For the three months ended March 31, 2018, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on the Company’s financial condition, results of operations or cash flows.

- 43 -

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC.

Qualitative Aspects of Market Risk. Market risk is the risk that the estimated fair value of the Company’s assets and liabilities will decline as a result of changes in interest rates or financial market volatility, or that the Company’s net income will be significantly reduced by interest rate changes.

The Company’s principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating market interest rates. The Company has sought to reduce the exposure of its earnings to changes in market interest rates by attempting to manage the mismatch between asset and liability maturities and interest rates. In order to reduce the exposure to interest rate fluctuations, the Company has developed strategies to manage its liquidity, shorten its effective maturities of certain interest-earning assets and decrease the interest rate sensitivity of its asset base. Management has sought to decrease the average maturity of its assets by emphasizing the origination of short-term commercial and consumer loans, all of which are retained by the Company for its portfolio. The Company relies on retail deposits as its primary source of funds. Management believes retail deposits, compared to brokered deposits, reduce the effects of interest rate fluctuations because they generally represent a more stable source of funds.

Quantitative Aspects of Market Risk. The Company does not maintain a trading account for any class of financial instrument nor does the Company engage in hedging activities or purchase high-risk derivative instruments. Furthermore, the Company is not subject to foreign currency exchange rate risk or commodity price risk.

Potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our normal business activities of gathering deposits, extending loans and investing in investment securities. Many factors affect the Company’s exposure to changes in interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. The Company’s earnings can also be affected by the monetary and fiscal policies of the U.S. Government and its agencies, particularly the Board of Governors of the Federal Reserve System.

An element in the Company’s ongoing process is to measure and monitor interest rate risk using a Net Interest Income at Risk simulation to model the interest rate sensitivity of the balance sheet and to quantify the impact of changing interest rates on the Company. The model quantifies the effects of various possible interest rate scenarios on projected net interest income over a one-year horizon. The model assumes a semi-static balance sheet and measures the impact on net interest income relative to a base case scenario of hypothetical changes in interest rates over twelve months and provides no effect given to any steps that management might take to counter the effect of the interest rate movements. The scenarios include prepayment assumptions, changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates in order to capture the impact from re-pricing, yield curve, option, and basis risks.

- 44 -

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC.

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 March 31, 2018 and December 31, 2017 financial information:

	At March 31, 2018						At December 31, 2017
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	$	415			1.63	%	$	(160	)		(0.62	)%
200bp		105			0.41			(221	)		(0.85	)
100bp		101			0.40			(96	)		(0.37	)
Static		-			-			-			-
(100)bp		(596	)		(2.34	)		(584	)		(2.25	)

At March 31, 2018, the Company’s simulated exposure to a change 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. Alternatively, an immediate and sustained decrease in rates of 1.00% would decrease the Company’s net interest income over a one year horizon compared to a flat interest rate scenario. At December 31, 2017, all scenarios described would have resulted in a decrease of the Company’s net interest income over a one year horizon compared to a flat interest scenario.

The Company also has longer term interest rate risk exposure, which may not be appropriately measured by Net Interest Income at Risk modeling. Therefore, the Company also uses an Economic Value of Equity (“EVE”) interest rate sensitivity analysis in order to evaluate the impact of its interest rate risk on earnings and capital. This is measured by computing the changes in net EVE for its cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. EVE modeling involves discounting present values of all cash flows for on and off balance sheet items under different interest rate scenarios and provides no effect given to any steps that management might take to counter the effect of the interest rate movements. The discounted present value of all cash flows represents the Company’s EVE and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. The amount of base case EVE and its sensitivity to shifts in interest rates provide a measure of the longer term re-pricing and option risk in the balance sheet.

- 45 -

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC.

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 March 31, 2018 and December 31, 2017 financial information:

	At March 31, 2018
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
300bp	$	102,897	$	687			0.67	%		14.70	%		109	bp
200bp		103,621		1,411			1.38			14.46			85	bp
100bp		103,341		1,131			1.10			14.08			47	bp
Static		102,210		-			-			13.61			0	bp
(100)bp		97,812		(4,398	)		(4.30	)		12.74			(87	)bp

	At December 31, 2017
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
300bp	$	105,691	$	(2,354	)		(2.18	)%		15.11	%		75	bp
200bp		107,347		(698	)		(0.65	)		14.98			62	bp
100bp		108,056		11			0.01			14.71			35	bp
Static		108,045		-			-			14.36			0	bp

- 46 -

The previous tables indicate that at March 31, 2018 the Company would expect an increase in its EVE in the event of a sudden and sustained 100, 200 or 300 basis point increase in prevailing interest rates and a decrease in its EVE in the event of a sudden and sustained 100 basis point decrease in prevailing interest rates. Alternatively, at December 31, 2017, the Company would expect a decrease in its EVE in the event of a sudden and sustained 200 or 300 basis point increase in prevailing interest rates and in the event of a sudden and sustained 100 basis point decrease in prevailing interest rates, and expect an increase in its EVE in the event of a sudden and sustained 100 bases point increase in prevailing interest rates.

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC.

The models are driven by expected behavior in various interest rate scenarios and many factors besides market interest rates affect the Company’s net interest income and EVE. For this reason, the Company models many different combinations of interest rates and balance sheet assumptions to understand its overall sensitivity to market interest rate changes. Therefore, as with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables and it is recognized that the model outputs are not guarantees of actual results. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in the modeling scenarios.

PART I - ITEM 4

CONTROLS AND PROCEDURES

FIRST CAPITAL, INC.

Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 47 -

PART II

OTHER INFORMATION

FIRST CAPITAL, INC.

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

- 48 -

PART II

OTHER INFORMATION

FIRST CAPITAL, INC.

Item 6. Exhibits

3.1 Articles of Incorporation of First Capital, Inc. (1)

3.2 Fifth Amended and Restated Bylaws of First Capital, Inc. (2)

11.0 Statement Re: Computation of Per Share Earnings (incorporated by reference to Note 5 of the Unaudited Consolidated Financial Statements contained herein)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer

32.2 Section 1350 Certification of Chief Financial Officer

101.0 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements.

___________________

(1) Incorporated by reference to Exhibit 3.1 filed with the Registration Statement on Form SB-2 on September 16, 1998, and any amendments thereto, Registration No. 333-63515, as amended by that Amendment to Articles of Incorporation provided as Exhibit 3.1 to the Report on Form 8-K files with the Securities and Exchange Commission on May 19, 2016.

(2) Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 18, 2013.

- 49 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST CAPITAL, INC.
	(Registrant)
Dated May 9, 2018	BY:	/s/William W. Harrod
		William W. Harrod
		President and CEO
Dated May 9, 2018	BY:	/s/ Michael C. Frederick
		Michael C. Frederick
		Executive Vice President, CFO
		and Treasurer

EX-31.1

Exhibit 31.1

CERTIFICATION

I, William W. Harrod, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2018	/s/ William W. Harrod
	William W. Harrod
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael C. Frederick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2018	/s/ Michael C. Frederick
	Michael C. Frederick
	Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Capital, Inc. and Subsidiaries (the "Company") on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission (the "Report"), I, William W. Harrod, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

DATE: May 9, 2018	/s/ William W. Harrod
	William W. Harrod
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Capital, Inc. and Subsidiaries (the "Company") on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission (the "Report"), I, Michael C. Frederick, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

DATE: May 9, 2018	/s/ Michael C. Frederick
	Michael C. Frederick
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Document Information [Line Items]
Entity Registrant Name	First Capital Inc.
Entity Central Index Key	0001070296
Trading Symbol	fcap
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		3,356,964
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks	$ 15,298	$ 19,478
Interest bearing deposits with banks	2,644	730
Federal funds sold	21,543	5,707
Total cash and cash equivalents	39,485	25,915
Interest-bearing time deposits	8,019	9,258
Securities available for sale, at fair value	264,843	271,172
Securities-held to maturity		1
Loans, net	407,279	409,618
Loans held for sale	2,141	2,630
Federal Home Loan Bank and other stock, at cost	1,979	1,979
Foreclosed real estate	3,809	3,971
Premises and equipment	14,806	15,031
Accrued interest receivable	2,650	2,694
Cash value of life insurance	8,322	7,279
Goodwill	6,472	6,472
Core deposit intangible	1,076	1,112
Other assets	6,443	1,824
Total Assets	767,324	758,956
LIABILITIES
Noninterest-bearing	139,111	129,828
Interest-bearing	542,460	534,734
Total deposits	681,571	664,562
Advances from Federal Home Loan Bank		10,000
Accrued interest payable	98	107
Accrued expenses and other liabilities	6,209	3,237
Total liabilities	687,878	677,906
EQUITY
Preferred stock of $.01 par value per share; authorized 1,000,000 shares; none issued
Common stock of $.01 par value per share Authorized 7,500,000 shares; issued 3,782,933 shares (3,762,933 in 2017); outstanding 3,356,964 shares (3,336,964 in 2017)	38	38
Additional paid-in capital	40,263	39,515
Retained earnings-substantially restricted	53,333	51,972
Unearned stock compensation	(911)	(212)
Accumulated other comprehensive loss	(5,077)	(2,060)
Less treasury stock, at cost - 425,969 shares	(8,315)	(8,315)
Total First Capital, Inc. stockholders' equity	79,331	80,938
Noncontrolling interest in subsidiary	115	112
Total equity	79,446	81,050
Total Liabilities and Equity	$ 767,324	$ 758,956

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	7,500,000	7,500,000
Common stock, issued (in shares)	3,782,933	3,762,933
Common stock, outstanding (in shares)	3,356,964	3,336,964
Treasury stock, shares (in shares)	425,969	425,969

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Loans, including fees	$ 5,301	$ 4,947
Securities:
Taxable	952	933
Tax-exempt	378	329
Dividends	33	17
Other interest income	100	117
Total interest income	6,764	6,343
INTEREST EXPENSE
Deposits	321	359
Advances from Federal Home Loan Bank	21
Total interest expense	342	359
Net interest income	6,422	5,984
Provision for loan losses	197	211
Net interest income after provision for loan losses	6,225	5,773
NONINTEREST INCOME
Noninterest income, financial service	1,197	1,115
Gain on sale of securities available for sale.	1
Gain on sale of loans	240	257
Increase in cash value of life insurance	43	41
Other income	45	40
Total noninterest income	1,526	1,453
NONINTEREST EXPENSE
Compensation and benefits	2,894	2,720
Occupancy and equipment	413	381
Data processing	744	648
Professional fees	178	163
Advertising	85	100
Net loss on foreclosed real estate	121	311
Other expenses	819	832
Total noninterest expense	5,254	5,155
Income before income taxes	2,497	2,071
Income tax expense	361	515
Net Income	2,136	1,556
Less: net income attributable to the noncontrolling interest in subsidiary	3	3
Net Income Attributable to First Capital, Inc.	$ 2,133	$ 1,553
Earnings per common share attributable to First Capital, Inc.:
Basic (in dollars per share)	$ 0.64	$ 0.46
Diluted (in dollars per share)	0.64	0.46
Dividends per share on common shares (in dollars per share)	$ 0.23	$ 0.21
Deposit Account [Member]
NONINTEREST INCOME
Noninterest income, financial service	$ 1,109	$ 1,001
Investment Advisory, Management and Administrative Service [Member]
NONINTEREST INCOME
Noninterest income, financial service	$ 88	$ 114

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 2,136	$ 1,556
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period	(4,015)	753
Income tax (expense) benefit	(999)	288
Net of tax amount	(3,016)	465
Less:reclassification adjustment for realized gains included in net income	(1)
Income tax expense
Net of tax amount	(1)
Other Comprehensive Income (Loss), net of tax	(3,017)	465
Comprehensive Income (Loss)	(881)	2,021
Less: comprehensive income attributable to the noncontrolling interest in subsidiary	3	3
Comprehensive Income (Loss) Attributable to First Capital, Inc.	$ (884)	$ 2,018

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Deferred Compensation, Share-based Payments [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]	Total
Balances at Dec. 31, 2016	$ 38	$ 39,515	$ 47,051	$ (2,277)	$ (300)	$ (8,297)	$ 112	$ 75,842
Net income			1,553				3	1,556
Other comprehensive income				465				465
Cash dividends			(701)					(701)
Stock compensation expense					21			21
Balances at Mar. 31, 2017	38	39,515	47,903	(1,812)	(279)	(8,297)	115	77,183
Balances at Dec. 31, 2017	38	39,515	51,972	(2,060)	(212)	(8,315)	112	81,050
Net income			2,133				3	2,136
Other comprehensive income				(3,017)				(3,017)
Cash dividends			(772)					(772)
Stock compensation expense					49			49
Restricted stock grants		748			(748)			0
Balances at Mar. 31, 2018	$ 38	$ 40,263	$ 53,333	$ (5,077)	$ (911)	$ (8,315)	$ 115	$ 79,446

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 2,136	$ 1,556
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Amortization of premiums and accretion of discounts on securities, net	431	411
Depreciation and amortization expense	312	299
Deferred income taxes	(93)	67
Stock compensation expense	49	21
Increase in cash value of life insurance	(43)	(41)
Gain on sale of securities	(1)
Provision for loan losses	197	211
Proceeds from sales of loans	16,547	12,891
Loans originated for sale	(15,818)	(10,552)
Gain on sale of loans	(240)	(257)
Amortization of tax credit investment	82
Net realized and unrealized loss on foreclosed real estate	29	227
Decrease (increase) in accrued interest receivable	44	(74)
Decrease in accrued interest payable	(9)	(11)
Net change in other assets/liabilities	(265)	77
Net Cash Provided By Operating Activities	3,358	4,825
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in interest-bearing time deposits		(245)
Proceeds from maturities and sales of interest-bearing time deposits	1,239	1,445
Purchase of securities available for sale	(6,326)	(22,815)
Proceeds from maturities of securities available for sale	520	850
Proceeds from sales of securities available for sale	1,458
Principal collected on mortgage-backed obligations	6,295	5,936
Investment in cash value of life insurance	(1,000)
Net (increase) decrease in loans receivable	2,176	(4,304)
Investment in tax credit entity	(436)
Proceeds from sale of foreclosed real estate	99	193
Purchase of premises and equipment	(50)	(371)
Net Cash Provided By (Used In) Investing Activities	3,975	(19,311)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	17,009	17,009
Repayment of advances from Federal Home Loan Bank	(10,000)
Dividends paid	(772)	(701)
Net Cash Provided By Financing Activities	6,237	16,308
Net Increase in Cash and Cash Equivalents	13,570	1,822
Cash and cash equivalents at beginning of period	25,915	45,835
Cash and Cash Equivalents at End of Period	$ 39,485	$ 47,657

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Note 1 - Presentation of Interim Information

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

       Presentation of Interim Information

First Capital, Inc. (“Company”) is the savings and loan holding company for First Harrison Bank (“Bank”), a federal savings bank and wholly-owned subsidiary. First Harrison Investments, Inc. and First Harrison Holdings, Inc. are wholly-owned Nevada corporate subsidiaries of the Bank that jointly own First Harrison, LLC, a Nevada limited liability corporation that holds and manages an investment portfolio. First Harrison REIT, Inc. (“REIT”) is a wholly-owned subsidiary of First Harrison Holdings, Inc. that holds a portion of the Bank’s real estate mortgage loan portfolio. FHB Risk Mitigation Services, Inc. (“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

ten

other

third

party insurance captives for which insurance

may

not

be currently available or economically feasible in the insurance marketplace. Heritage Hill, LLC is a wholly-owned subsidiary of the Bank that holds and manages certain foreclosed real estate properties.

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”). The Conversion has been approved by both the IDFI and FDIC. After the conversion, expected to be completed in

June 2018,

the IDFI will become the Bank’s primary regulator and the FDIC will become the Bank’s primary federal regulator. The Conversion is

not

expected to affect the Bank’s clients in any way and will

not

affect FDIC deposit insurance on eligible accounts.

Additionally, in connection with the Conversion, the Company filed an application with the Federal Reserve Bank of St. Louis to change from a savings and loan holding company to a financial holding company. The Company has received the approval of the Federal Reserve Bank of St. Louis, and this change is expected to happen simultaneously with the Conversion discussed above.

In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary to present fairly the financial position as of

March 31, 2018,

and the results of operations for the

three

months ended

March 31, 2018

and

2017

and the cash flows for the

three

months ended

March 31, 2018

and

2017.

All of these adjustments are of a normal, recurring nature. Such adjustments are the only adjustments included in the unaudited consolidated financial statements. Interim results are

not

necessarily indicative of results for a full year or any other period.

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and are presented as permitted by the instructions to Form

10

-Q. Accordingly, they do

not

contain certain information included in the Company’s annual audited consolidated financial statements and related footnotes for the year ended

December 31, 2017

included in the Company’s Annual Report on Form

10

-K.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassifications had

no

effect on net income or stockholders’ equity.

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Note 2 - Investment Securities

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Investments in Debt and Equity Instruments, Cash and Cash Equivalents, Unrealized and Realized Gains (Losses) [Text Block]

2.

       Investment Securities

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at

March 31, 2018

and

December 31, 2017

are summarized as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	111,090	$	-	$	4,345	$	106,745
Agency CMO		18,720		-		471		18,249
Other debt securities:
Agency notes and bonds		70,495		-		1,447		69,048
Municipal obligations		71,198		743		1,140		70,801
Total securities available for sale	$	271,503	$	743	$	7,403	$	264,843
December 31, 2017
Securities available for sale:
Agency mortgage-backed securities	$	114,902	$	-	$	2,253	$	112,649
Agency CMO		15,660		1		338		15,323
Other debt securities:
Agency notes and bonds		70,013		-		985		69,028
Municipal obligations		73,303		1,274		405		74,172
Total securities available for sale	$	273,878	$	1,275	$	3,981	$	271,172
Securities held to maturity:
Agency mortgage-backed securities	$	1	$	-	$	-	$	1
Total securities held to maturity	$	1	$	-	$	-	$	1

Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank (“FHLB”), which are government-sponsored enterprises.

The amortized cost and fair value of debt securities as of

March 31, 2018,

by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO

may

differ from contractual maturities because the mortgages underlying the obligations

may

be prepaid without penalty.

	Securities Available for Sale
	Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	15,335	$	15,241
Due after one year through five years		64,630		63,251
Due after five years through ten years		32,072		31,459
Due after ten years		29,656		29,898
		141,693		139,849
Mortgage-backed securities and CMO		129,810		124,994
	$	271,503	$	264,843

Information pertaining to investment securities available for sale with gross unrealized losses at

March 31, 2018,

aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		36	$	31,683	$	962
Agency CMO		7		2,948		77
Agency notes and bonds		4		11,047		132
Muncipal obligations		41		21,667		502
Total less than twelve months		88		67,345		1,673
Continuous loss position more than twelve months:
Agency mortgage-backed securities		63		75,048		3,383
Agency CMO		18		11,150		394
Agency notes and bonds		19		57,501		1,315
Muncipal obligations		29		14,284		638
Total more than twelve months		129		157,983		5,730
Total securities available for sale		217	$	225,328	$	7,403

Information pertaining to investment securities available for sale with gross unrealized losses at

December 31, 2017,

aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows. At

December 31, 2017,

the Company did

not

have any securities held to maturity with an unrealized loss.

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		37	$	37,570	$	400
Agency CMO		6		3,036		38
Agency notes and bonds		4		11,119		69
Muncipal obligations		20		10,955		83
Total less than twelve months		67		62,680		590
Continuous loss position more than twelve months:
Agency mortgage-backed securities		60		74,960		1,853
Agency CMO		18		11,801		300
Agency notes and bonds		19		57,909		916
Muncipal obligations		29		14,667		322
Total more than twelve months		126		159,337		3,391
Total securities available for sale		193	$	222,017	$	3,981

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (

1

) the length of time and the extent to which the fair value has been less than cost, (

2

) the financial condition and near-term prospects of the issuer, and (

3

) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

At

March 31, 2018,

the U.S. government agency debt securities, including agency notes and bonds, mortgage-backed securities and CMO, and municipal obligations in a loss position had depreciated approximately

3.2%

from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by

first

mortgage loans and municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale,

no

declines are deemed to be other-than-temporary.

While management does

not

anticipate any credit-related impairment losses at

March 31, 2018,

additional deterioration in market and economic conditions

may

have an adverse impact on credit quality in the future.

During the

three

months ended

March 31, 2018,

the Company realized gross gains of

$7,000

and gross losses of

$6,000

on sales of available for sale municipal securities and U.S. government agency mortgage-backed CMO’s, respectively. During the

three

months ended

March 31, 2017,

the Company did

not

have any security sales.

Certain available for sale debt securities were pledged to secure public fund deposits at

March 31, 2018

and

December 31, 2017.

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Note 3 - Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3

.       Loans and Allowance for Loan Losses

The Company’s loan and allowance for loan loss policies are as follows:

Loans are stated at unpaid principal balances, less net deferred loan fees and the allowance for loan losses. The Company originates real estate mortgage, commercial business and consumer loans. A substantial portion of the loan portfolio is represented by mortgage loans to customers in the Louisville, Kentucky metropolitan statistical area (MSA). The ability of the Company’s customers to honor their loan agreements is largely dependent upon the real estate and general economic conditions in this area.

Loan origination and commitment fees, as well as certain direct costs of underwriting and closing loans, are deferred and amortized as a yield adjustment to interest income over the lives of the related loans using the interest method. Amortization of net deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The recognition of income on a loan is discontinued and previously accrued interest is reversed, when interest or principal payments become

ninety

(

90

) days past due unless, in the opinion of management, the outstanding interest remains collectible. Past due status is determined based on contractual terms. Generally, by applying the cash receipts method, interest income is subsequently recognized only as received until the loan is returned to accrual status. The cash receipts method is used when the likelihood of further loss on the loan is remote. Otherwise, the Company applies the cost recovery method and applies all payments as a reduction of the unpaid principal balance until the loan qualifies for return to accrual status. Interest income on impaired loans is recognized using the cost recovery method, unless the likelihood of further loss on the loan is remote

.

A loan is restored to accrual status when all principal and interest payments are brought current and the borrower has demonstrated the ability to make future payments of principal and interest as scheduled, which generally requires that the borrower demonstrate a period of performance of at least

six

consecutive months.

For portfolio segments other than consumer loans, the Company’s practice is to charge-off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons. A partial charge-off is recorded on a loan when the uncollectibility of a portion of the loan has been confirmed, such as when a loan is discharged in bankruptcy, the collateral is liquidated, a loan is restructured at a reduced principal balance, or other identifiable events that lead management to determine the full principal balance of the loan will

not

be repaid. A specific reserve is recognized as a component of the allowance for estimated losses on loans individually evaluated for impairment. Partial charge-offs on nonperforming and impaired loans are included in the Company’s historical loss experience used to estimate the general component of the allowance for loan losses as discussed below. Specific reserves are

not

considered charge-offs in management’s analysis of the allowance for loan losses because they are estimates and the outcome of the loan relationship is undetermined. At

March 31, 2018,

the Company had

five

loans on which partial charge-offs in the aggregate of

$97,000

had been recorded.

Consumer loans

not

secured by real estate are typically charged off at

90

days past due, or earlier if deemed uncollectible, unless the loans are in the process of collection. Overdrafts are charged off after

45

days past due. Charge-offs are typically recorded on loans secured by real estate when the property is foreclosed upon.

The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the loan portfolio at the balance sheet date. Additions to the allowance for loan losses are made by the provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company uses a disciplined process and methodology to evaluate the allowance for loan losses on at least a quarterly basis that is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that

may

affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated for impairment or loans otherwise classified as doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the underlying discounted collateral value (or present value of estimated future cash flows) of the impaired loan is lower than the carrying value of that loan.

The general component covers non-classified loans and classified loans that are found, upon individual evaluation, to

not

be impaired. Such loans are pooled by segment and losses are modeled using annualized historical loss experience adjusted for qualitative factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior

five

years. The Company’s historical loss experience is then adjusted by an overall loss factor weighting adjustment based on a qualitative analysis prepared by management and reviewed on a quarterly basis. The overall loss factor considers changes in underwriting standards, economic conditions, changes and trends in past due and classified loans and other internal and external factors.

Management also applies additional loss factor multiples to loans classified as watch, special mention and substandard that are

not

individually evaluated for impairment. The loss factor multiples for classified loans are based on management’s assessment of historical trends regarding losses experienced on classified loans in prior periods. See below for additional discussion of the qualitative factors utilized in management’s allowance for loan loss methodology at

March 31, 2018

and

December 31, 2017.

Management exercises significant judgment in evaluating the relevant historical loss experience and the qualitative factors. Management also monitors the differences between estimated and actual incurred loan losses for loans considered impaired in order to evaluate the effectiveness of the estimation process and make any changes in the methodology as necessary.

Management utilizes the following portfolio segments in its analysis of the allowance for loan losses: residential real estate, land, construction, commercial real estate, commercial business, home equity and

second

mortgage, and other consumer loans. Additional discussion of the portfolio segments and the risks associated with each segment can be found in the Company’s Annual Report on Form

10

-K for the year ended

December 31, 2017.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are

not

classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Values for collateral dependent loans are generally based on appraisals obtained from independent licensed real estate appraisers, with adjustments applied for estimated costs to sell the property, costs to complete unfinished or repair damaged property and other factors. New appraisals are generally obtained for all significant properties when a loan is identified as impaired, and a property is considered significant if the value of the property is estimated to exceed

$200,000.

Subsequent appraisals are obtained as needed or if management believes there has been a significant change in the market value of the property. In instances where it is

not

deemed necessary to obtain a new appraisal, management bases its impairment and allowance for loan loss analysis on the original appraisal with adjustments for current conditions based on management’s assessment of market factors and management’s inspection of the property.

At

March 31, 2018

and

December 31, 2017,

the recorded investments in loans secured by residential real estate properties for which formal foreclosure proceedings are in process was

$1.0

million and

$588,000,

respectively.

Loans at

March 31, 2018

and

December 31, 2017

consisted of the following:

(In thousands)	March 31, 2018			December 31, 2017
Real estate mortgage loans:
Residential	$	134,298		$	136,399
Land		21,248			18,198
Residential construction		31,207			28,854
Commercial real estate		95,471			100,133
Commercial real estate contruction		13,261			17,161
Commercial business loans		33,186			34,114
Consumer loans:
Home equity and second mortgage loans		49,423			49,802
Automobile loans		38,809			38,361
Loans secured by savings accounts		1,294			1,751
Unsecured loans		3,553			3,744
Other consumer loans		7,275			8,714
Gross loans		429,025			437,231
Less undisbursed portion of loans in process		(19,155	)		(25,020	)
Principal loan balance		409,870			412,211
Deferred loan origination fees, net		1,040			1,041
Allowance for loan losses		(3,631	)		(3,634	)
Loans, net	$	407,279		$	409,618

The following table provides the components of the Company’s recorded investment in loans at

March 31, 2018:

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	134,298	$	21,248	$	25,313		$	95,471		$	33,186	$	49,423	$	50,931	$	409,870
Accrued interest receivable		494		72		48			221			98		185		190		1,308
Net deferred loan origination fees and costs		91		16		(7	)		(41	)		1		980		-		1,040
Recorded investment in loans	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,803	$	94	$	-		$	365		$	319	$	91	$	8	$	3,680
Collectively evaluated for impairment		131,727		21,242		25,354			95,239			32,966		50,497		51,113		408,138
Acquired with deteriorated credit quality		353		-		-			47			-		-		-		400
Ending balance	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218

The following table provides the components of the Company’s recorded investment in loans at

December 31, 2017:

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,399	$	18,198	$	20,995		$	100,133		$	34,114	$	49,802	$	52,570	$	412,211
Accrued interest receivable		474		94		49			249			87		189		223		1,365
Net deferred loan origination
fees and costs		87		17		(10	)		(42	)		2		987		-		1,041
Recorded investment in loans	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,907	$	-	$	-		$	401		$	42	$	73	$	-	$	3,423
Collectively evaluated for impairment		133,703		18,309		21,034			99,891			34,161		50,905		52,793		410,796
Acquired with deteriorated credit quality		350		-		-			48			-		-		-		398
Ending balance	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617

An analysis of the allowance for loan losses as of

March 31, 2018

is as follows:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	101	$	-	$	-	$	-	$	3	$	13	$	-	$	117
Collectively evaluated for impairment		200		156		291		1,520		273		667		407		3,514
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	301	$	156	$	291	$	1,520	$	276	$	680	$	407	$	3,631

An analysis of the allowance for loan losses as of

December 31, 2017

is as follows:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	35	$	-	$	-	$	-	$	4	$	13	$	-	$	52
Collectively evaluated for impairment		182		133		245		1,622		287		697		414		3,580
Acquired with deteriorated credit quality		2		-		-		-		-		-		-		2
Ending balance	$	219	$	133	$	245	$	1,622	$	291	$	710	$	414	$	3,634

An analysis of the changes in the allowance for loan losses for the

three

months ended

March 31, 2018

is as follows:

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg			Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	219		$	133	$	245	$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		139			23		46		(110	)		(15	)		(33	)		147			197
Charge-offs		(60	)		-		-		-			(1	)		-			(196	)		(257	)
Recoveries		3			-		-		8			1			3			42			57
Ending balance	$	301		$	156	$	291	$	1,520		$	276		$	680		$	407		$	3,631

An analysis of the changes in the allowance for loan losses for the

three

months ended

March 31, 2017

is as follows:

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg		Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	380		$	56	$	80	$	1,670		$	198		$	683	$	319		$	3,386
Provisions for loan losses		(85	)		53		143		(128	)		85			14		129			211
Charge-offs		(40	)		-		-		(1	)		(43	)		-		(204	)		(288	)
Recoveries		16			-		-		44			4			1		44			109
Ending balance	$	271		$	109	$	223	$	1,585		$	244		$	698	$	288		$	3,418

At

March 31, 2018

and

December 31, 2017,

management applied specific qualitative factor adjustments to various portfolio segments as they determined that the historical loss experience was

not

indicative of the level of risk in the remaining balance of those portfolio segments. These adjustments increased the loss factors by

0.15%

to

20%

for certain loan groups, and increased the estimated allowance for loan losses related to those portfolio segments by approximately

$2.3

million and

$2.1

million at

March 31, 2018

and

December 31, 2017,

respectively. These changes were made to reflect management’s estimates of inherent losses in these portfolio segments at

March 31, 2018

and

December 31, 2017.

At

March 31, 2018

and

December 31, 2017,

for each loan portfolio segment, management applied an overall qualitative factor of

1.18

to the Company’s historical loss factors. The overall qualitative factor is derived from management’s analysis of changes and trends in the following qualitative factors: underwriting standards, economic conditions, past due loans and other internal and external factors. Each of the

four

factors above was assigned an equal weight to arrive at an average for the overall qualitative factor of

1.18

at

March 31, 2018

and

December 31, 2017.

The effect of the overall qualitative factor was to increase the estimated allowance for loan losses by

$534,000

and

$536,000

at

March 31, 2018

and

December 31, 2017,

respectively. Additional discussion of the overall qualitative factor can be found in the Company’s Annual Report on Form

10

-K for the year ended

December 31, 2017.

There were

no

changes in management’s assessment of the overall qualitative factor components from

December 31, 2017

to

March 31, 2018.

Management also adjusts the historical loss factors for loans classified as watch, special mention and substandard that are

not

individually evaluated for impairment. The adjustments consider the increased likelihood of loss on classified loans based on the Company’s separate historical experience for classified loans. The effect of the adjustments for classified loans was to increase the estimated allowance for loan losses by

$515,000

and

$506,000

at

March 31, 2018

and

December 31, 2017,

respectively. These factors were

not

adjusted during the period from

December 31, 2017

to

March 31, 2018.

The following table summarizes the Company’s impaired loans as of

March 31, 2018

and for the

three

months ended

March 31, 2018

and

2017.

The Company did

not

recognize any interest income on impaired loans using the cash receipts method of accounting for the

three

month periods ended

March 31, 2018

and

2017:

	At March 31, 2018						Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,525	$	2,760	$	-	$	2,610	$	7	$	2,010	$	8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		291		292		-		152		4		74		-
Home equity/2nd mortgage		78		86		-		69		-		230		-
Other consumer		8		8		-		4		-		6		-
		3,361		3,604		-		3,265		16		3,470		11
Loans with an allowance recorded:
Residential		278		285		101		245		-		150		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		-		-		-		-
Commercial business		28		30		3		29		-		59		-
Home equity/2nd mortgage		13		13		13		13		-		13		-
Other consumer		-		-		-		-		-		18		-
		319		328		117		287		-		240		-
Total:
Residential		2,803		3,045		101		2,855		7		2,160		8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		319		322		3		181		4		133		-
Home equity/2nd mortgage		91		99		13		82		-		243		-
Other consumer		8		8		-		4		-		24		-
	$	3,680	$	3,932	$	117	$	3,552	$	16	$	3,710	$	11

The following table summarizes the Company’s impaired loans as of

December 31, 2017:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,695	$	2,948	$	-
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		12		12		-
Home equity/2nd mortgage		60		68		-
Other consumer		-		-		-
		3,168		3,563		-
Loans with an allowance recorded:
Residential		212		218		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		-		-		-
Commercial business		30		30		4
Home equity/2nd mortgage		13		13		13
Other consumer		-		-		-
		255		261		52
Total:
Residential		2,907		3,166		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		42		42		4
Home equity/2nd mortgage		73		81		13
Other consumer		-		-		-
	$	3,423	$	3,824	$	52

Nonperforming loans consists of nonaccrual loans and loans over

90

days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at

March 31, 2018

and

December 31, 2017:

	March 31, 2018						December 31, 2017
	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans		Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)
Residential	$	2,262	$	100	$	2,362	$	2,298	$	109	$	2,407
Land		94		-		94		-		95		95
Construction		-		-		-		-		-		-
Commercial real estate		104		-		104		139		-		139
Commercial business		139		66		205		42		59		101
Home equity/2nd mortgage		76		-		76		57		-		57
Other consumer		-		13		13		-		28		28
Total	$	2,675	$	179	$	2,854	$	2,536	$	291	$	2,827

The following table presents the aging of the recorded investment in loans at

March 31, 2018:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,108	$	155	$	1,473	$	3,736	$	130,794	$	353	$	134,883
Land		381		-		94		475		20,861		-		21,336
Construction		-		-		-		-		25,354		-		25,354
Commercial real estate		-		233		104		337		95,267		47		95,651
Commercial business		156		-		124		280		33,005		-		33,285
Home equity/2nd mortgage		152		1		13		166		50,422		-		50,588
Other consumer		249		15		13		277		50,844		-		51,121
Total	$	3,046	$	404	$	1,821	$	5,271	$	406,547	$	400	$	412,218

The following table presents the aging of the recorded investment in loans at

December 31, 2017:

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,612	$	338	$	1,255	$	4,205	$	132,405	$	350	$	136,960
Land		186		-		95		281		18,028		-		18,309
Construction		-		-		-		-		21,034		-		21,034
Commercial real estate		379		-		139		518		99,774		48		100,340
Commercial business		46		49		102		197		34,006		-		34,203
Home equity/2nd mortgage		468		27		13		508		50,470		-		50,978
Other consumer		420		37		28		485		52,308		-		52,793
Total	$	4,111	$	451	$	1,632	$	6,194	$	408,025	$	398	$	414,617

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings:

Special Mention:

Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard:

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are

not

corrected.

Doubtful:

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss:

Loans classified as loss are considered uncollectible and of such little value that their continuance on the institution’s books as an asset is

not

warranted.

Loans

not

meeting the criteria above that are analyzed individually as part of the described process are considered to be pass rated loans.

The following table presents the recorded investment in loans by risk category as of the date indicated:

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
March 31, 2018
Pass	$	131,433	$	21,109	$	25,125	$	92,367	$	32,287	$	50,510	$	50,966	$	403,797
Special Mention		395		83		229		1,347		786		-		152		2,992
Substandard		778		50		-		1,833		73		2		3		2,739
Doubtful		2,277		94		-		104		139		76		-		2,690
Loss		-		-		-		-		-		-		-		-
Total	$	134,883	$	21,336	$	25,354	$	95,651	$	33,285	$	50,588	$	51,121	$	412,218
December 31, 2017
Pass	$	133,618	$	18,003	$	20,173	$	97,219	$	33,245	$	50,919	$	52,629	$	405,806
Special Mention		348		157		861		1,362		734		-		161		3,623
Substandard		684		149		-		1,620		182		2		3		2,640
Doubtful		2,310		-		-		139		42		57		-		2,548
Loss		-		-		-		-		-		-		-		-
Total	$	136,960	$	18,309	$	21,034	$	100,340	$	34,203	$	50,978	$	52,793	$	414,617

The following table summarizes the Company’s troubled debt restructurings (TDRs) by accrual status as of

March 31, 2018

and

December 31, 2017:

	March 31, 2018								December 31, 2017
	Accruing		Nonaccrual		Total		Related Allowance for Loan Losses		Accruing		Nonaccrual		Total		Related Allowance for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	484	$	106	$	590	$	-	$	487	$	106	$	593	$	-
Commercial real estate		354		-		354		-		356		-		356		-
Commercial business		179		-		179		-		-		-		-		-
Home equity and 2nd mortgage		15		-		15		-		15		-		15		-
Total	$	1,032	$	106	$	1,138	$	-	$	858	$	106	$	964	$	-

At

March 31, 2018

and

December 31, 2017,

there were

no

commitments to lend additional funds to debtors whose loan terms have been modified in a TDR.

The following table summarizes information in regard to TDRs that were restructured during the

three

months ended

March 31, 2018:

	Three months ended March 31, 2018
	Number of Contracts		Pre-Modifcation Outstanding Balance		Post-Modifcation Outstanding Balance
	(Dollars in thousands)
Troubled debt restructurings:
Commercial Business		1	$	179	$	179
Total		1	$	179	$	179

For the TDR listed above, the terms of modification included the deferral of contractual principal payments. There were

no

TDRs that were restructured during the

three

months ended

March 31, 2017.

There were

no

principal charge-offs recorded as a result of TDRs and there was

no

specific allowance for loan losses related to TDRs modified during the

three

months ended

March 31, 2018

or

2017.

There were

no

TDRs modified within the previous

12

months for which there was a subsequent payment default (defined as the loan becoming more than

90

days past due, being moved to nonaccrual status, or the collateral being foreclosed upon) during the

three

months ended

March 31, 2018

and

2017.

In the event that a TDR subsequently defaults, the Company evaluates the restructuring for possible impairment. As a result, the related allowance for loan losses

may

be increased or charge-offs

may

be taken to reduce the carrying amount of the loan.

Purchased Credit Impaired (PCI) Loans

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with

no

carryover of the related allowance for loan and lease losses. Such loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as credit score, loan type and date of origination. In determining the estimated fair value of purchased loans or pools, management considers a number of factors including the remaining life, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, and net present value of cash flows expected to be received, among others. Purchased loans that have evidence of credit deterioration since origination for which it is deemed probable at the date of acquisition that the acquirer will

not

collect all contractually required principal and interest payments are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

310

-

30.

The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. The difference between the expected cash flows and the fair value at acquisition is recorded as interest income over the remaining life of the loan or pool of loans and is referred to as the accretable yield. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which is recognized as future interest income.

The following table presents the carrying amount of PCI loans accounted for under ASC

310

-

30

at

March 31, 2018

and

December 31, 2017:

(In thousands)	March 31, 2018		December 31 , 2017
Residential real estate	$	353	$	350
Commercial real estate		47		48
Carrying amount		400		398
Allowance for loan losses		0		2
Carrying amount, net of allowance	$	400	$	396

The outstanding balance of PCI loans accounted for under ASC

310

-

30,

including contractual principal, interest, fees and penalties was

$617,000

and

$625,000

at

March 31, 2018

and

December 31, 2017,

respectively.

There was

no

allowance for loan losses related to PCI loans at

March 31, 2018.

The allowance for loan losses related to PCI loans was

$2,000

at

December 31, 2017.

There was a

$2,000

reduction of the allowance for loan losses related to PCI loans for the

three

-month period ended

March 31, 2018.

There were

no

net provisions for loan losses related to PCI loans for the

three

-month period ended

March 31, 2017.

Accretable yield, or income expected to be collected, is as follows for the

three

month periods ended

March 31, 2018

and

2017:

	2018			2017
Balance at beginning of period	$	470		$	252
New loans purchased		-			-
Accretion to income		(14	)		(14	)
Disposals and other adjustments		-			-
Reclassification from nonaccretable difference		3			6
Balance at end of period	$	459		$	244

XML

Note 4 - Qualified Affordable Housing Project Investment

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Affordable Housing Program [Text Block]

4.

       Qualified Affordable Housing Project Investment

On

January 19, 2018,

the Bank entered into an agreement to invest in qualified affordable housing projects through a limited liability company. At

March 31, 2018,

the balance of the Bank’s investment was

$3.9

million and is reflected in other assets on the consolidated balance sheet. The unfunded commitment related to the qualified affordable housing project investment was

$3.5

million at

March 31, 2018

and is reflected in other liabilities on the consolidated balance sheet. The Bank expects to fulfill the commitment as capital calls are made through

2029.

The investment is accounted for using the proportional amortization method. During the

three

months ended

March 31, 2018,

the Bank recognized amortization expense of

$82,000,

which was included in income tax expense on the consolidated statement of income. Additionally, during the

three

months ended

March 31, 2018,

the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of

$98,000.

XML

Note 5 - Supplemental Disclosure for Earnings Per Share

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

5.

       Supplemental Disclosure for Earnings Per Share

	Three Months Ended March 31,
	2018		2017
(Dollars in thousands, exept per share data)
Basic
Earnings:
Net income attributable to First Capital, Inc.	$2,133		$1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Net income attributable to First Capital, Inc. per common share, basic	$	0.64	$	0.46
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,133	$	1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Add: Dilutive effect of restricted stock		5,671		5,070
Weighted average common shares outstanding, as adjusted		3,332,135		3,347,122
Net income attributable to First Capital, Inc. per common share, diluted	$	0.64	$	0.46

Nonvested restricted stock shares are

not

considered as outstanding for purposes of computing weighted average common shares outstanding.

No

shares were excluded from the calculations of diluted net income per share because their effect would be anti-dilutive for the

three

-month periods ended

March 31, 2018

and

2017.

XML

Note 6 - Stock Option Plan

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6.

       Stock Option Plan

On

May 20, 2009,

the Company adopted the

2009

Equity Incentive Plan (the “Plan”). The Plan provides for the award of stock options, restricted stock, performance shares and stock appreciation rights. The aggregate number of shares of the Company’s common stock available for issuance under the Plan

may

not

exceed

223,000

shares.

At

March 31, 2018,

184,000

shares of the Company’s common stock were available for issuance under the Plan. The Company

may

grant both non-statutory and statutory stock options which

may

not

have a term exceeding

ten

years. In the case of incentive stock options, the aggregate fair value of the stock (determined at the time the incentive stock option is granted) for which any optionee

may

be granted incentive options which are

first

exercisable during any calendar year shall

not

exceed

$100,000.

Option prices

may

not

be less than the fair market value of the underlying stock at the date of the grant. An award of a performance share is a grant of a right to receive shares of the Company’s common stock which is contingent upon the achievement of specific performance criteria or other objectives set at the grant date. Stock appreciation rights are equity or cash settled share-based compensation arrangements whereby the number of shares that will ultimately be issued or the cash payment is based upon the appreciation of the Company’s common stock. Awards granted under the Plan

may

be granted either alone, in addition to, or in tandem with, any other award granted under the Plan. The terms of the Plan also include provisions whereby all unearned options and restricted shares become immediately exercisable and fully vested upon a change in control.

The fair market value of stock options granted is estimated at the date of grant using an option pricing model. Expected volatilities are based on historical volatility of the Company's stock. The expected term of options granted represents the period of time that options are expected to be outstanding and is based on historical trends. The risk free rate for the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. As of

March 31, 2018,

no

stock options had been granted under the Plan.

On

February 20, 2018,

the Company granted

20,000

restricted stock shares to directors, officers and key employees at a grant-date price of

$37.42

per share for a total of

$748,000.

The restricted stock vests ratably from the grant date through

July 1, 2023,

with

20%

of the shares vesting each year on

July 1

beginning

July 1, 2019.

On

February 17, 2015,

the Company granted

19,500

restricted stock shares to directors, officers and key employees at a grant-date price of

$24.50

per share for a total of

$478,000

with a similar vesting schedule from

July 1, 2016

through

July 1, 2020.

Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). Compensation expense related to restricted stock recognized for the

three

-month periods ended

March 31, 2018

and

2017

amounted to

$49,000

and

$21,000,

respectively.

A summary of the Company’s nonvested restricted shares under the Plan as of

March 31, 2018

and changes during the

three

-month period then ended is presented below.

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2018		10,500	$	24.50
Granted		20,000	$	37.42
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2018		30,500	$	32.97

At

March 31, 2018,

there was

$911,000

of total unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of

5.25

years.

XML

Note 7 - Supplemental Disclosures of Cash Flow Information

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

7.

       Supplemental Disclosures of Cash Flow Information

	Three Months Ended March 31,
	2018		2017
	( In thousands )
Cash payments for:
Interest	$	351	$	370
Taxes (net of refunds received)		0		0
Noncash investing activities:
Transfers from loans to real estate acquired through foreclosure		27		194

XML

Note 8 - Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

8. Fair Value Measurements

FASB ASC Topic

820

, Fair Value Measurements,

provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level

1

measurements) and the lowest priority to unobservable inputs (Level

3

measurements). The

three

levels of the fair value hierarchy under FASB ASC Topic

820

are described as follows:

Level 1:	Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets
Level 2:	Inputs to the valuation methodology include quoted market prices for similar assets or liabilities in active markets; quoted market prices for identical or similar assets or liabilities in markets that are not active; or inputs that are derived principally from or can be corroborated by observable market data by correlation or other means.
Level 3:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth on the following page. These valuation methodologies were applied to all of the Company’s financial and nonfinancial assets carried at fair value or the lower of cost or fair value. The table below presents the balances of assets measured at fair value on a recurring and nonrecurring basis as of

March 31, 2018

and

December 31, 2017.

The Company had

no

liabilities measured at fair value as of

March 31, 2018

or

December 31, 2017.

	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	106,745	$	-	$	106,745
Agency CMO		-		18,249		-		18,249
Agency notes and bonds		-		69,048		-		69,048
Municipal obligations		-		70,801		-		70,801
Total securities available for sale	$	-	$	264,843	$	-	$	264,843
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,702	$	2,702
Land		-		-		94		94
Commercial real estate		-		-		365		365
Commercial business		-		-		316		316
Home equity and second mortgage		-		-		78		78
Other consumer		-		-		8		8
Total impaired loans	$	-	$	-	$	3,563	$	3,563
Loans held for sale	$	-	$	2,141	$	-	$	2,141
Foreclosed real estate:
Residential real estate	$	-	$	-	$	281	$	281
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,809	$	3,809
December 31, 2017
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	112,649	$	-	$	112,649
Agency CMO		-		15,323		-		15,323
Agency notes and bonds		-		69,028		-		69,028
Municipal obligations		-		74,172		-		74,172
Total securities available for sale	$	-	$	271,172	$	-	$	271,172
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,872	$	2,872
Commercial real estate		-		-		401		401
Commercial business		-		-		38		38
Home equity and second mortgage		-		-		60		60
Total impaired loans	$	-	$	-	$	3,371	$	3,371
Loans held for sale	$	-	$	2,630	$	-	$	2,630
Foreclosed real estate:
Residential real estate	$	-	$	-	$	443	$	443
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,971	$	3,971

Fair value is based upon quoted market prices, where available. If quoted market prices are

not

available, fair value is based on internally developed models or obtained from

third

parties that primarily use, as inputs, observable market-based parameters or a matrix pricing model that employs the Bond Market Association’s standard calculations for cash flow and price/yield analysis and observable market-based parameters. Valuation adjustments

may

be made to ensure that financial instruments are recorded at fair value, or the lower of cost or fair value. These adjustments

may

include unobservable parameters. Any such valuation adjustments have been applied consistently over time. The Company’s valuation methodologies

may

produce a fair value calculation that

may

not

be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available for Sale

.

Securities classified as available for sale are reported at fair value on a recurring basis.  These securities are classified as Level

1

of the valuation hierarchy where quoted market prices from reputable

third

-party brokers are available in an active market. If quoted market prices are

not

available, the Company obtains fair value measurements from an independent pricing service.  These securities are reported using Level

2

inputs and the fair value measurements consider observable data that

may

include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.

Impaired Loans

.

Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans is classified as Level

3

in the fair value hierarchy.

Impaired loans are carried at the present value of estimated future cash flows using the loan's effective interest rate or the fair value of collateral less estimated costs to sell if the loan is collateral dependent. At

March 31, 2018

and

December 31, 2017,

all impaired loans were considered to be collateral dependent for the purpose of determining fair value. Collateral

may

be real estate and/or business assets, including equipment, inventory and/or accounts receivable. The fair value of the collateral is generally determined based on real estate appraisals or other independent evaluations by qualified professionals, adjusted for estimated costs to sell the property, costs to complete or repair the property and other factors to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral. At

March 31, 2018

and

December 31, 2017,

the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral and estimated costs to sell the collateral ranging from

14%

to

62%,

with a weighted average discount of

39%.

The Company recognized provisions for loan losses for impaired loans for the

three

months ended

March 31, 2018

and

March 31, 2017

of

$65,000

and

$2,000,

respectively.

Loans Held for Sale

. Loans held for sale are carried at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors.  These measurements are classified as Level

2.

Foreclosed Real Estate

.

Foreclosed real estate is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of foreclosed real estate is classified as Level

3

in the fair value hierarchy.

Foreclosed real estate is reported at fair value less estimated costs to dispose of the property. The fair values are determined by real estate appraisals which are then discounted to reflect management’s estimate of the fair value of the property given current market conditions and the condition of the collateral. At

March 31, 2018,

the significant unobservable inputs used in the fair value measurement of foreclosed real estate included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral and estimated costs to sell the property ranging from

10%

to

76%,

with a weighted average of

44%.

At

December 31, 2017,

the discount from appraised value ranged from

17%

to

75%,

with a weighted average of

45%.

The Company recognized losses of

$228,000

to write down foreclosed real estate for the

three

months ended

March 31, 2017.

There were

no

charges to write down foreclosed real estate recognized in income for the

three

months ended

March 31, 2018.

There have been

no

changes in the valuation techniques and related inputs used for assets measured at fair value on a recurring and nonrecurring basis during the

three

month periods ended

March 31, 2018

and

2017.

There were

no

transfers into or out of the Company’s Level

3

financial assets for the

three

month periods ended

March 31, 2018

and

2017

. In addition, there were

no

transfers into or out of Levels

1

and

2

of the fair value hierarchy during the

three

month periods ended

March 31, 2018

and

2017

.

GAAP requires disclosure of the fair value of financial assets and financial liabilities, whether or

not

recognized in the balance sheet. In cases where quoted market prices are

not

available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could

not

be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do

not

represent the underlying value of the Company.

The estimated fair values of the Company's financial instruments are as follows:

	Carrying		Fair		Fair Value Measurements Using
(In thousands)	Value		Value		Level 1		Level 2		Level 3
March 31, 2018
Financial assets:
Cash and cash equivalents	$	39,485	$	39,485	$	39,485	$	-	$	-
Interest-bearing time deposits		8,019		7,944		-		7,944		-
Securities available for sale		264,843		264,843		-		264,843		-
Loans held for sale		2,141		2,186		-		2,186		-
Loans, net		407,279		402,059		-		-		402,059
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,650		2,650		-		2,650		-
Financial liabilities:
Deposits		681,571		679,700		-		-		679,700
Accrued interest payable		98		98		-		98		-
December 31, 2017:
Financial assets:
Cash and cash equivalents	$	25,915	$	25,915	$	25,915	$	-	$	-
Interest-bearing time deposits		9,258		9,220		-		9,220		-
Securities available for sale		271,172		271,172		-		271,172		-
Securities held to maturity		1		1		-		1		-
Loans held for sale		2,630		2,678		-		2,678		-
Loans, net		409,618		404,931		-		-		404,931
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,694		2,694		-		2,694		-
Financial liabilities:
Deposits		664,562		663,006		-		-		663,006
FHLB Advances		10,000		10,000		-		10,000		-
Accrued interest payable		107		107		-		107		-

XML

Note 9 - Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

9. Revenue from Contracts with Customers

As of

January 1, 2018,

the Company adopted Accounting Standards Update (“ASU”)

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

),

using the modified retrospective approach. The adoption of the ASU had

no

material impact on the measurement or recognition of revenue; however, additional disclosures have been added in accordance with the ASU. See Note

10

for additional information on this new accounting standard.

All of the Company’s revenue from contracts with customers in the scope of FASB ASC

606

is recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the

three

months ended

March 31, 2018

and

2017:

	2018		2017
Service charges on deposit accounts	$	1,109	$	1,001
Investment advisory income		88		114
Revenue from contracts with customers		1,197		1,115
Gain on sale of loans and securities		241		257
Increase in cash value of life insurance		43		41
Other		45		40
Other noninterest income		329		338
Total noninterest income	$	1,526	$	1,453

A description of the Company’s revenue streams accounted for under FASB ASC

606

follows:

Service Charges on Deposit Accounts

: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income

: The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is included in service charges on deposit accounts.

Investment Advisory Income

: The Company earns trust, insurance commissions, brokerage commissions and annuities income from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e., the trade date). Other related fees, which are based on a fixed fee schedule, are recognized when the services are rendered.

XML

Note 10 - Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

10. Recent Accounting Pronouncements

The following are summaries of recently issued or adopted accounting pronouncements that impact the accounting and reporting practices of the Company:

In

May 2014,

the FASB issued ASU

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

. The update provides a

five

-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards). The guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. For public entities, the guidance was originally to be effective for annual reporting periods beginning after

December 15, 2016,

including interim periods within that reporting period. However, with the issuance of ASU

No.

2015

-

14

in

August 2015,

the FASB deferred the effective date of ASU

No.

2014

-

09

by

one

year for all entities, making the amendments effective for public entities for annual reporting periods beginning after

December 15, 2017,

including interim periods within those reporting periods. The adoption of this update as of

January 1, 2018

did

not

have a material impact on the Company’s consolidated financial position or results of operations. See Note

9

for further discussion.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments – Overall (Subtopic

825

-

10

) – Recognition and Measurement of Financial Assets and Financial Liabilities

. The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the guidance revises an entity’s accounting related to (

1

) the classification and measurement of investments in equity securities and (

2

) the presentation of certain fair value changes for financial liabilities measured at fair value. The guidance also amends certain disclosure requirements associated with fair value of financial instruments. For public business entities, the guidance is effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this update as of

January 1, 2018

did

not

have a material impact on the Company’s consolidated financial position or results of operations.

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

)

. The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of

12

months or less, a lessee is permitted to make an accounting policy election

not

to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management is evaluating the new guidance, but does

not

expect the adoption of this update to have a material impact on the Company’s consolidated financial position or results of operations.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

)

. The update replaces the incurred loss methodology for recognizing credit losses under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to-maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. For the Company, the amendments in the update are effective for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. The Company is currently assessing the impact the guidance will have upon adoption, but management expects to recognize a

one

-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the

first

reporting period in which the new standard is effective. In planning for the implementation of ASU

2016

-

13,

the Company has formed a current expected credit loss (“CECL”) implementation team consisting of members of senior management that meets on a periodic basis and is currently evaluating software solutions, data requirements and loss methodologies.

In

August 2016,

the FASB issued ASU

No.

2016

-

15,

Statement of Cash Flows (Topic

230

) – Classification of Certain Cash Receipts and Cash Payments

. The update addresses

eight

specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in the update are effective for public business entities for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period, and all amendments must be adopted in the same period. The adoption of this update is

not

expected to have a material impact on the Company’s consolidated financial position or results of operations.

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

Receivables – Nonrefundable Fees and Other Costs (Subtopic

310

-

20

) – Premium Amortization on Purchased Callable Debt Securities

. The update shortens the amortization period for certain callable debt securities held at a premium. Specifically, the update requires the premium to be amortized to the earliest call date. The update does

not

require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in the update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The adoption of this update is

not

expected to have a material impact on the Company’s consolidated financial position or results of operations.

XML

Note 2 - Investment Securities (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Marketable Securities [Table Text Block]

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	111,090	$	-	$	4,345	$	106,745
Agency CMO		18,720		-		471		18,249
Other debt securities:
Agency notes and bonds		70,495		-		1,447		69,048
Municipal obligations		71,198		743		1,140		70,801
Total securities available for sale	$	271,503	$	743	$	7,403	$	264,843
December 31, 2017
Securities available for sale:
Agency mortgage-backed securities	$	114,902	$	-	$	2,253	$	112,649
Agency CMO		15,660		1		338		15,323
Other debt securities:
Agency notes and bonds		70,013		-		985		69,028
Municipal obligations		73,303		1,274		405		74,172
Total securities available for sale	$	273,878	$	1,275	$	3,981	$	271,172
Securities held to maturity:
Agency mortgage-backed securities	$	1	$	-	$	-	$	1
Total securities held to maturity	$	1	$	-	$	-	$	1

Investments Classified by Contractual Maturity Date [Table Text Block]

	Securities Available for Sale
	Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	15,335	$	15,241
Due after one year through five years		64,630		63,251
Due after five years through ten years		32,072		31,459
Due after ten years		29,656		29,898
		141,693		139,849
Mortgage-backed securities and CMO		129,810		124,994
	$	271,503	$	264,843

Schedule of Unrealized Loss on Investments [Table Text Block]

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		36	$	31,683	$	962
Agency CMO		7		2,948		77
Agency notes and bonds		4		11,047		132
Muncipal obligations		41		21,667		502
Total less than twelve months		88		67,345		1,673
Continuous loss position more than twelve months:
Agency mortgage-backed securities		63		75,048		3,383
Agency CMO		18		11,150		394
Agency notes and bonds		19		57,501		1,315
Muncipal obligations		29		14,284		638
Total more than twelve months		129		157,983		5,730
Total securities available for sale		217	$	225,328	$	7,403

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		37	$	37,570	$	400
Agency CMO		6		3,036		38
Agency notes and bonds		4		11,119		69
Muncipal obligations		20		10,955		83
Total less than twelve months		67		62,680		590
Continuous loss position more than twelve months:
Agency mortgage-backed securities		60		74,960		1,853
Agency CMO		18		11,801		300
Agency notes and bonds		19		57,909		916
Muncipal obligations		29		14,667		322
Total more than twelve months		126		159,337		3,391
Total securities available for sale		193	$	222,017	$	3,981

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Note 3 - Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(In thousands)	March 31, 2018			December 31, 2017
Real estate mortgage loans:
Residential	$	134,298		$	136,399
Land		21,248			18,198
Residential construction		31,207			28,854
Commercial real estate		95,471			100,133
Commercial real estate contruction		13,261			17,161
Commercial business loans		33,186			34,114
Consumer loans:
Home equity and second mortgage loans		49,423			49,802
Automobile loans		38,809			38,361
Loans secured by savings accounts		1,294			1,751
Unsecured loans		3,553			3,744
Other consumer loans		7,275			8,714
Gross loans		429,025			437,231
Less undisbursed portion of loans in process		(19,155	)		(25,020	)
Principal loan balance		409,870			412,211
Deferred loan origination fees, net		1,040			1,041
Allowance for loan losses		(3,631	)		(3,634	)
Loans, net	$	407,279		$	409,618

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	101	$	-	$	-	$	-	$	3	$	13	$	-	$	117
Collectively evaluated for impairment		200		156		291		1,520		273		667		407		3,514
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	301	$	156	$	291	$	1,520	$	276	$	680	$	407	$	3,631

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	35	$	-	$	-	$	-	$	4	$	13	$	-	$	52
Collectively evaluated for impairment		182		133		245		1,622		287		697		414		3,580
Acquired with deteriorated credit quality		2		-		-		-		-		-		-		2
Ending balance	$	219	$	133	$	245	$	1,622	$	291	$	710	$	414	$	3,634

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg			Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	219		$	133	$	245	$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		139			23		46		(110	)		(15	)		(33	)		147			197
Charge-offs		(60	)		-		-		-			(1	)		-			(196	)		(257	)
Recoveries		3			-		-		8			1			3			42			57
Ending balance	$	301		$	156	$	291	$	1,520		$	276		$	680		$	407		$	3,631

	Residential Real Estate			Land		Construction		Commercial Real Estate			Commercial Business			Home Equity & 2nd Mtg		Other Consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	380		$	56	$	80	$	1,670		$	198		$	683	$	319		$	3,386
Provisions for loan losses		(85	)		53		143		(128	)		85			14		129			211
Charge-offs		(40	)		-		-		(1	)		(43	)		-		(204	)		(288	)
Recoveries		16			-		-		44			4			1		44			109
Ending balance	$	271		$	109	$	223	$	1,585		$	244		$	698	$	288		$	3,418

Impaired Financing Receivables [Table Text Block]

	At March 31, 2018						Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,525	$	2,760	$	-	$	2,610	$	7	$	2,010	$	8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		291		292		-		152		4		74		-
Home equity/2nd mortgage		78		86		-		69		-		230		-
Other consumer		8		8		-		4		-		6		-
		3,361		3,604		-		3,265		16		3,470		11
Loans with an allowance recorded:
Residential		278		285		101		245		-		150		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		-		-		-		-
Commercial business		28		30		3		29		-		59		-
Home equity/2nd mortgage		13		13		13		13		-		13		-
Other consumer		-		-		-		-		-		18		-
		319		328		117		287		-		240		-
Total:
Residential		2,803		3,045		101		2,855		7		2,160		8
Land		94		95		-		47		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		365		363		-		383		5		1,150		3
Commercial business		319		322		3		181		4		133		-
Home equity/2nd mortgage		91		99		13		82		-		243		-
Other consumer		8		8		-		4		-		24		-
	$	3,680	$	3,932	$	117	$	3,552	$	16	$	3,710	$	11

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,695	$	2,948	$	-
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		12		12		-
Home equity/2nd mortgage		60		68		-
Other consumer		-		-		-
		3,168		3,563		-
Loans with an allowance recorded:
Residential		212		218		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		-		-		-
Commercial business		30		30		4
Home equity/2nd mortgage		13		13		13
Other consumer		-		-		-
		255		261		52
Total:
Residential		2,907		3,166		35
Land		-		-		-
Construction		-		-		-
Commercial real estate		401		535		-
Commercial business		42		42		4
Home equity/2nd mortgage		73		81		13
Other consumer		-		-		-
	$	3,423	$	3,824	$	52

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

	March 31, 2018						December 31, 2017
	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans		Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)
Residential	$	2,262	$	100	$	2,362	$	2,298	$	109	$	2,407
Land		94		-		94		-		95		95
Construction		-		-		-		-		-		-
Commercial real estate		104		-		104		139		-		139
Commercial business		139		66		205		42		59		101
Home equity/2nd mortgage		76		-		76		57		-		57
Other consumer		-		13		13		-		28		28
Total	$	2,675	$	179	$	2,854	$	2,536	$	291	$	2,827

Past Due Financing Receivables [Table Text Block]

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,108	$	155	$	1,473	$	3,736	$	130,794	$	353	$	134,883
Land		381		-		94		475		20,861		-		21,336
Construction		-		-		-		-		25,354		-		25,354
Commercial real estate		-		233		104		337		95,267		47		95,651
Commercial business		156		-		124		280		33,005		-		33,285
Home equity/2nd mortgage		152		1		13		166		50,422		-		50,588
Other consumer		249		15		13		277		50,844		-		51,121
Total	$	3,046	$	404	$	1,821	$	5,271	$	406,547	$	400	$	412,218

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans
	(In thousands)
Residential	$	2,612	$	338	$	1,255	$	4,205	$	132,405	$	350	$	136,960
Land		186		-		95		281		18,028		-		18,309
Construction		-		-		-		-		21,034		-		21,034
Commercial real estate		379		-		139		518		99,774		48		100,340
Commercial business		46		49		102		197		34,006		-		34,203
Home equity/2nd mortgage		468		27		13		508		50,470		-		50,978
Other consumer		420		37		28		485		52,308		-		52,793
Total	$	4,111	$	451	$	1,632	$	6,194	$	408,025	$	398	$	414,617

Financing Receivable Credit Quality Indicators [Table Text Block]

	Residential Real Estate		Land		Construction		Commercial Real Estate		Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
March 31, 2018
Pass	$	131,433	$	21,109	$	25,125	$	92,367	$	32,287	$	50,510	$	50,966	$	403,797
Special Mention		395		83		229		1,347		786		-		152		2,992
Substandard		778		50		-		1,833		73		2		3		2,739
Doubtful		2,277		94		-		104		139		76		-		2,690
Loss		-		-		-		-		-		-		-		-
Total	$	134,883	$	21,336	$	25,354	$	95,651	$	33,285	$	50,588	$	51,121	$	412,218
December 31, 2017
Pass	$	133,618	$	18,003	$	20,173	$	97,219	$	33,245	$	50,919	$	52,629	$	405,806
Special Mention		348		157		861		1,362		734		-		161		3,623
Substandard		684		149		-		1,620		182		2		3		2,640
Doubtful		2,310		-		-		139		42		57		-		2,548
Loss		-		-		-		-		-		-		-		-
Total	$	136,960	$	18,309	$	21,034	$	100,340	$	34,203	$	50,978	$	52,793	$	414,617

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	March 31, 2018								December 31, 2017
	Accruing		Nonaccrual		Total		Related Allowance for Loan Losses		Accruing		Nonaccrual		Total		Related Allowance for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	484	$	106	$	590	$	-	$	487	$	106	$	593	$	-
Commercial real estate		354		-		354		-		356		-		356		-
Commercial business		179		-		179		-		-		-		-		-
Home equity and 2nd mortgage		15		-		15		-		15		-		15		-
Total	$	1,032	$	106	$	1,138	$	-	$	858	$	106	$	964	$	-

Schedule of Troubled Debt Restructurings [Table Text Block]

	Three months ended March 31, 2018
	Number of Contracts		Pre-Modifcation Outstanding Balance		Post-Modifcation Outstanding Balance
	(Dollars in thousands)
Troubled debt restructurings:
Commercial Business		1	$	179	$	179
Total		1	$	179	$	179

Schedule of Purchased Credit Impaired Loans [Table Text Block]

(In thousands)	March 31, 2018		December 31 , 2017
Residential real estate	$	353	$	350
Commercial real estate		47		48
Carrying amount		400		398
Allowance for loan losses		0		2
Carrying amount, net of allowance	$	400	$	396

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Table Text Block]

	2018			2017
Balance at beginning of period	$	470		$	252
New loans purchased		-			-
Accretion to income		(14	)		(14	)
Disposals and other adjustments		-			-
Reclassification from nonaccretable difference		3			6
Balance at end of period	$	459		$	244

Financing Receivable [Member]

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	134,298	$	21,248	$	25,313		$	95,471		$	33,186	$	49,423	$	50,931	$	409,870
Accrued interest receivable		494		72		48			221			98		185		190		1,308
Net deferred loan origination fees and costs		91		16		(7	)		(41	)		1		980		-		1,040
Recorded investment in loans	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,803	$	94	$	-		$	365		$	319	$	91	$	8	$	3,680
Collectively evaluated for impairment		131,727		21,242		25,354			95,239			32,966		50,497		51,113		408,138
Acquired with deteriorated credit quality		353		-		-			47			-		-		-		400
Ending balance	$	134,883	$	21,336	$	25,354		$	95,651		$	33,285	$	50,588	$	51,121	$	412,218

	Residential Real Estate		Land		Construction			Commercial Real Estate			Commercial Business		Home Equity & 2nd Mtg		Other Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,399	$	18,198	$	20,995		$	100,133		$	34,114	$	49,802	$	52,570	$	412,211
Accrued interest receivable		474		94		49			249			87		189		223		1,365
Net deferred loan origination
fees and costs		87		17		(10	)		(42	)		2		987		-		1,041
Recorded investment in loans	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,907	$	-	$	-		$	401		$	42	$	73	$	-	$	3,423
Collectively evaluated for impairment		133,703		18,309		21,034			99,891			34,161		50,905		52,793		410,796
Acquired with deteriorated credit quality		350		-		-			48			-		-		-		398
Ending balance	$	136,960	$	18,309	$	21,034		$	100,340		$	34,203	$	50,978	$	52,793	$	414,617

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Note 5 - Supplemental Disclosure for Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31,
	2018		2017
(Dollars in thousands, exept per share data)
Basic
Earnings:
Net income attributable to First Capital, Inc.	$2,133		$1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Net income attributable to First Capital, Inc. per common share, basic	$	0.64	$	0.46
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,133	$	1,553
Shares:
Weighted average common shares outstanding		3,326,464		3,342,052
Add: Dilutive effect of restricted stock		5,671		5,070
Weighted average common shares outstanding, as adjusted		3,332,135		3,347,122
Net income attributable to First Capital, Inc. per common share, diluted	$	0.64	$	0.46

XML

Note 6 - Stock Option Plan (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2018		10,500	$	24.50
Granted		20,000	$	37.42
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2018		30,500	$	32.97

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Note 7 - Supplemental Disclosures of Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Three Months Ended March 31,
	2018		2017
	( In thousands )
Cash payments for:
Interest	$	351	$	370
Taxes (net of refunds received)		0		0
Noncash investing activities:
Transfers from loans to real estate acquired through foreclosure		27		194

XML

Note 8 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	106,745	$	-	$	106,745
Agency CMO		-		18,249		-		18,249
Agency notes and bonds		-		69,048		-		69,048
Municipal obligations		-		70,801		-		70,801
Total securities available for sale	$	-	$	264,843	$	-	$	264,843
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,702	$	2,702
Land		-		-		94		94
Commercial real estate		-		-		365		365
Commercial business		-		-		316		316
Home equity and second mortgage		-		-		78		78
Other consumer		-		-		8		8
Total impaired loans	$	-	$	-	$	3,563	$	3,563
Loans held for sale	$	-	$	2,141	$	-	$	2,141
Foreclosed real estate:
Residential real estate	$	-	$	-	$	281	$	281
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,809	$	3,809
December 31, 2017
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	112,649	$	-	$	112,649
Agency CMO		-		15,323		-		15,323
Agency notes and bonds		-		69,028		-		69,028
Municipal obligations		-		74,172		-		74,172
Total securities available for sale	$	-	$	271,172	$	-	$	271,172
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,872	$	2,872
Commercial real estate		-		-		401		401
Commercial business		-		-		38		38
Home equity and second mortgage		-		-		60		60
Total impaired loans	$	-	$	-	$	3,371	$	3,371
Loans held for sale	$	-	$	2,630	$	-	$	2,630
Foreclosed real estate:
Residential real estate	$	-	$	-	$	443	$	443
Commercial real estate		-		-		3,528		3,528
Total foreclosed real estate	$	-	$	-	$	3,971	$	3,971

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Carrying		Fair		Fair Value Measurements Using
(In thousands)	Value		Value		Level 1		Level 2		Level 3
March 31, 2018
Financial assets:
Cash and cash equivalents	$	39,485	$	39,485	$	39,485	$	-	$	-
Interest-bearing time deposits		8,019		7,944		-		7,944		-
Securities available for sale		264,843		264,843		-		264,843		-
Loans held for sale		2,141		2,186		-		2,186		-
Loans, net		407,279		402,059		-		-		402,059
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,650		2,650		-		2,650		-
Financial liabilities:
Deposits		681,571		679,700		-		-		679,700
Accrued interest payable		98		98		-		98		-
December 31, 2017:
Financial assets:
Cash and cash equivalents	$	25,915	$	25,915	$	25,915	$	-	$	-
Interest-bearing time deposits		9,258		9,220		-		9,220		-
Securities available for sale		271,172		271,172		-		271,172		-
Securities held to maturity		1		1		-		1		-
Loans held for sale		2,630		2,678		-		2,678		-
Loans, net		409,618		404,931		-		-		404,931
FHLB and other stock		1,979		N/A		N/A		N/A		N/A
Accrued interest receivable		2,694		2,694		-		2,694		-
Financial liabilities:
Deposits		664,562		663,006		-		-		663,006
FHLB Advances		10,000		10,000		-		10,000		-
Accrued interest payable		107		107		-		107		-

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Note 9 - Revenue from Contracts with Customers (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	2018		2017
Service charges on deposit accounts	$	1,109	$	1,001
Investment advisory income		88		114
Revenue from contracts with customers		1,197		1,115
Gain on sale of loans and securities		241		257
Increase in cash value of life insurance		43		41
Other		45		40
Other noninterest income		329		338
Total noninterest income	$	1,526	$	1,453

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Note 2 - Investment Securities (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Debt Securities, Held-to-maturity, Unrealized Loss Position, Fair Value, Total			$ 0
Available-for-Sale, Securities in Unrealized Loss Positions, Depreciation from Amortized Cost Percentage	3.20%
Proceeds from Sale of Debt Securities, Available-for-sale		$ 0
Municipal Notes [Member]
Debt Securities, Available-for-sale, Realized Gain	$ 7,000
U.S Government Agency Mortgage-backed CMO [Member]
Debt Securities, Available-for-sale, Realized Loss	$ 6,000

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Note 2 - Investment Securities - Investment Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available for sale, amortized cost	$ 271,503	$ 273,878
Securities available for sale, gross unrealized gains	743	1,275
Securities available for sale, gross unrealized losses	7,403	3,981
Securities available for sale, at fair value	264,843	271,172
Securities-held to maturity		1
Securities held to maturity, gross unrealized gains
Securities held to maturity, gross unrealized losses
Securities held to maturity, fair value		1
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale, amortized cost	111,090	114,902
Securities available for sale, gross unrealized gains
Securities available for sale, gross unrealized losses	4,345	2,253
Securities available for sale, at fair value	106,745	112,649
Securities-held to maturity		1
Securities held to maturity, gross unrealized gains
Securities held to maturity, gross unrealized losses
Securities held to maturity, fair value		1
Agency Collateralized Mortgage Obligations [Member]
Securities available for sale, amortized cost	18,720	15,660
Securities available for sale, gross unrealized gains		1
Securities available for sale, gross unrealized losses	471	338
Securities available for sale, at fair value	18,249	15,323
US Government Agencies Debt Securities [Member]
Securities available for sale, amortized cost	70,495	70,013
Securities available for sale, gross unrealized gains
Securities available for sale, gross unrealized losses	1,447	985
Securities available for sale, at fair value	69,048	69,028
Municipal Notes [Member]
Securities available for sale, amortized cost	71,198	73,303
Securities available for sale, gross unrealized gains	743	1,274
Securities available for sale, gross unrealized losses	1,140	405
Securities available for sale, at fair value	$ 70,801	$ 74,172

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Note 2 - Investment Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available for sale, amortized cost, due in one year or less	$ 15,335
Securities available for sale, fair value, due in one year or less	15,241
Securities available for sale, amortized cost, due after one year through five years	64,630
Securities available for sale, fair value, due after one year through five years	63,251
Securities available for sale, amortized cost, due after five years through ten years	32,072
Securities available for sale, fair value, due after five years through ten years	31,459
Securities available for sale, amortized cost, due after ten years	29,656
Securities available for sale, fair value, due after ten years	29,898
Securities available for sale, amortized cost, single maturity	141,693
Securities available for sale, fair value, single maturity	139,849
Securities available for sale, amortized cost, mortgage-backed securities and CMO	129,810
Securities available for sale, fair value, mortgage-backed securities and CMO	124,994
Securities available for sale, amortized cost	271,503	$ 273,878
Securities available for sale, fair value	264,843	$ 271,172
Debt Securities [Member]
Securities available for sale, amortized cost	271,503
Securities available for sale, fair value	$ 264,843

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Note 2 - Investment Securities - Investment Securities Available for Sale (Details) $ in Thousands	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Number of investment positions - less than twelve months	88	67
Fair value - less than twelve months	$ 67,345	$ 62,680
Gross unrealized losses - less than twelve months	$ 1,673	$ 590
Number of investment positions - more than twelve months	129	126
Fair value - more than twelve months	$ 157,983	$ 159,337
Gross unrealized losses - more than twelve months	$ 5,730	$ 3,391
Number of investment positions	217	193
Fair value	$ 225,328	$ 222,017
Gross unrealized losses	$ 7,403	$ 3,981
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Number of investment positions - less than twelve months	36	37
Fair value - less than twelve months	$ 31,683	$ 37,570
Gross unrealized losses - less than twelve months	$ 962	$ 400
Number of investment positions - more than twelve months	63	60
Fair value - more than twelve months	$ 75,048	$ 74,960
Gross unrealized losses - more than twelve months	$ 3,383	$ 1,853
Agency Collateralized Mortgage Obligations [Member]
Number of investment positions - less than twelve months	7	6
Fair value - less than twelve months	$ 2,948	$ 3,036
Gross unrealized losses - less than twelve months	$ 77	$ 38
Number of investment positions - more than twelve months	18	18
Fair value - more than twelve months	$ 11,150	$ 11,801
Gross unrealized losses - more than twelve months	$ 394	$ 300
US Government Agencies Debt Securities [Member]
Number of investment positions - less than twelve months	4	4
Fair value - less than twelve months	$ 11,047	$ 11,119
Gross unrealized losses - less than twelve months	$ 132	$ 69
Number of investment positions - more than twelve months	19	19
Fair value - more than twelve months	$ 57,501	$ 57,909
Gross unrealized losses - more than twelve months	$ 1,315	$ 916
Municipal Notes [Member]
Number of investment positions - less than twelve months	41	20
Fair value - less than twelve months	$ 21,667	$ 10,955
Gross unrealized losses - less than twelve months	$ 502	$ 83
Number of investment positions - more than twelve months	29	29
Fair value - more than twelve months	$ 14,284	$ 14,667
Gross unrealized losses - more than twelve months	$ 638	$ 322

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Note 3 - Loans and Allowance for Loan Losses (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Loans Charge-off Period	90 days
Performance Period	180 days
Financing Receivable, Allowance for Credit Losses, Write-downs	$ 257,000	$ 288,000
Collateral Dependent Loans, Value of Significant Properties	200,000
Mortgage Loans in Process of Foreclosure, Amount	$ 1,000,000		$ 588,000
Financing Receivable, Allowance for Credit Losses, Loss Factor Increase	0.15%
Financing Receivable, Allowance for Credit Losses, Loss Factor	20.00%
Impaired Financing Receivable, Interest Income, Cash Basis Method, Total	$ 0	$ 0
Loans and Leases Receivable, Impaired, Commitment to Lend	$ 0		0
Financing Receivable, Modifications, Number of Contracts	1	0
Troubled Debt Restructuring, Principal Charge-offs	$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0
Financial Receivable, Trouble Debt Restructure, Defaulted, Provisions Loan Losses or Net Charge-offs			0
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total	$ 617,000		625,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Allowance for Loan Losses	0		2,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Allowance for Loan Losses, Decreases	2,000	$ 0
Nonperforming Financial Instruments [Member]
Loans and Leases Receivable, Allowance, Ending Balance	0
Classified Loans [Member]
Allowance for Loan and Lease Losses, Period Increase (Decrease), Total	515,000		506,000
Qualitative Factor Past Due Loans [Member]
Financing Receivable, Allowance for Credit Losses, Effect of Change in Method	$ 2,300,000		$ 2,100,000
Overall Qualitative Factor [Member]
Financing Receivable, Allowance for Credit Losses Risk Factor	1.18		1.18
Allowance for Loan and Lease Losses, Period Increase (Decrease), Total	$ 534,000		$ 536,000
Bank Overdrafts [Member]
Loans Charge-off Period	45 days
Other than Consumer Portfolio Segment [Member]
Number of Loans	5
Financing Receivable, Allowance for Credit Losses, Write-downs	$ 97,000

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Note 3 - Loans and Allowance for Loan Losses - Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans	$ 429,025	$ 437,231
Less undisbursed portion of loans in process	(19,155)	(25,020)
Principal loan balance	409,870	412,211
Deferred loan origination fees, net	1,040	1,041
Allowance for loan losses	(3,631)	(3,634)	$ (3,418)	$ (3,386)
Loans, net	407,279	409,618
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	134,298	136,399
Allowance for loan losses	(301)	(219)	(271)	(380)
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Loans	21,248	18,198
Principal loan balance	21,248	18,198
Deferred loan origination fees, net	16	17
Allowance for loan losses	(156)	(133)	(109)	(56)
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Loans	31,207	28,854
Principal loan balance	25,313	20,995
Deferred loan origination fees, net	(7)	(10)
Allowance for loan losses	(291)	(245)	(223)	(80)
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Loans	95,471	100,133
Principal loan balance	95,471	100,133
Deferred loan origination fees, net	(41)	(42)
Allowance for loan losses	(1,520)	(1,622)	(1,585)	(1,670)
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Construction [Member]
Loans	13,261	17,161
Commercial Portfolio Segment [Member]
Loans	33,186	34,114
Principal loan balance	33,186	34,114
Deferred loan origination fees, net	1	2
Allowance for loan losses	(276)	(291)	(244)	(198)
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Loans	49,423	49,802
Principal loan balance	49,423	49,802
Deferred loan origination fees, net	980	987
Allowance for loan losses	(680)	(710)	(698)	(683)
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans	38,809	38,361
Consumer Portfolio Segment [Member] | Loans Secured by Deposits [Member]
Loans	1,294	1,751
Consumer Portfolio Segment [Member] | Unsecured Loan [Member]
Loans	3,553	3,744
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Loans	7,275	8,714
Principal loan balance	50,931	52,570
Deferred loan origination fees, net
Allowance for loan losses	$ (407)	$ (414)	$ (288)	$ (319)

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Note 3 - Loans and Allowance for Loan Losses - Recorded Investments in Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Principal loan balance	$ 409,870	$ 412,211
Accrued interest receivable	1,308	1,365
Deferred loan origination fees, net	1,040	1,041
Recorded investment in loans	412,218	414,617
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	3,680	3,423
Collectively evaluated for impairment	408,138	410,796
Recorded investment in loans	412,218	414,617
Principal loan balance	409,870	412,211
Accrued interest receivable	1,308	1,365
Deferred loan origination fees, net	1,040	1,041
Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	400	398
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans	400	398
Real Estate Mortgage Portfolio Segment [Member] | Real Estate Loan [Member]
Principal loan balance	134,298	136,399
Accrued interest receivable	494	474
Deferred loan origination fees, net	91	87
Recorded investment in loans	134,883	136,960
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	2,803	2,907
Collectively evaluated for impairment	131,727	133,703
Recorded investment in loans	134,883	136,960
Principal loan balance	134,298	136,399
Accrued interest receivable	494	474
Deferred loan origination fees, net	91	87
Real Estate Mortgage Portfolio Segment [Member] | Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	353	350
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans	353	350
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Principal loan balance	21,248	18,198
Accrued interest receivable	72	94
Deferred loan origination fees, net	16	17
Recorded investment in loans	21,336	18,309
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	94
Collectively evaluated for impairment	21,242	18,309
Recorded investment in loans	21,336	18,309
Principal loan balance	21,248	18,198
Accrued interest receivable	72	94
Deferred loan origination fees, net	16	17
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Principal loan balance	25,313	20,995
Accrued interest receivable	48	49
Deferred loan origination fees, net	(7)	(10)
Recorded investment in loans	25,354	21,034
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment
Collectively evaluated for impairment	25,354	21,034
Recorded investment in loans	25,354	21,034
Principal loan balance	25,313	20,995
Accrued interest receivable	48	49
Deferred loan origination fees, net	(7)	(10)
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Principal loan balance	95,471	100,133
Accrued interest receivable	221	249
Deferred loan origination fees, net	(41)	(42)
Recorded investment in loans	95,651	100,340
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	365	401
Collectively evaluated for impairment	95,239	99,891
Recorded investment in loans	95,651	100,340
Principal loan balance	95,471	100,133
Accrued interest receivable	221	249
Deferred loan origination fees, net	(41)	(42)
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	47	48
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans	47	48
Commercial Portfolio Segment [Member]
Principal loan balance	33,186	34,114
Accrued interest receivable	98	87
Deferred loan origination fees, net	1	2
Recorded investment in loans	33,285	34,203
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	319	42
Collectively evaluated for impairment	32,966	34,161
Recorded investment in loans	33,285	34,203
Principal loan balance	33,186	34,114
Accrued interest receivable	98	87
Deferred loan origination fees, net	1	2
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Principal loan balance	49,423	49,802
Accrued interest receivable	185	189
Deferred loan origination fees, net	980	987
Recorded investment in loans	50,588	50,978
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	91	73
Collectively evaluated for impairment	50,497	50,905
Recorded investment in loans	50,588	50,978
Principal loan balance	49,423	49,802
Accrued interest receivable	185	189
Deferred loan origination fees, net	980	987
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Principal loan balance	50,931	52,570
Accrued interest receivable	190	223
Deferred loan origination fees, net
Recorded investment in loans	51,121	52,793
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	8
Collectively evaluated for impairment	51,113	52,793
Recorded investment in loans	51,121	52,793
Principal loan balance	50,931	52,570
Accrued interest receivable	190	223
Deferred loan origination fees, net
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Recorded Investment in Loans as Evaluated for Impairment:
Recorded investment in loans

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Note 3 - Loans and Allowance for Loan Losses - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Dec. 31, 2017
Individually evaluated for impairment			$ 117	$ 52
Collectively evaluated for impairment			3,514	3,580
Allowance for loan losses	$ 3,631	$ 3,386	3,631	3,634
Beginning balance	3,634	3,386
Provision for loan losses	197	211
Charge-offs	(257)	(288)
Recoveries	57	109
Ending balance	3,631	3,418
Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses				2
Beginning balance	2
Ending balance
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Individually evaluated for impairment			101	35
Collectively evaluated for impairment			200	182
Allowance for loan losses	301	380	301	219
Beginning balance	219	380
Provision for loan losses	139	(85)
Charge-offs	(60)	(40)
Recoveries	3	16
Ending balance	301	271
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses				2
Beginning balance	2
Ending balance
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Individually evaluated for impairment
Collectively evaluated for impairment			156	133
Allowance for loan losses	156	56	156	133
Beginning balance	133	56
Provision for loan losses	23	53
Charge-offs
Recoveries
Ending balance	156	109
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Individually evaluated for impairment
Collectively evaluated for impairment			291	245
Allowance for loan losses	291	80	291	245
Beginning balance	245	80
Provision for loan losses	46	143
Charge-offs
Recoveries
Ending balance	291	223
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Individually evaluated for impairment
Collectively evaluated for impairment			1,520	1,622
Allowance for loan losses	1,520	1,670	1,520	1,622
Beginning balance	1,622	1,670
Provision for loan losses	(110)	(128)
Charge-offs		(1)
Recoveries	8	44
Ending balance	1,520	1,585
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance
Commercial Portfolio Segment [Member]
Individually evaluated for impairment			3	4
Collectively evaluated for impairment			273	287
Allowance for loan losses	276	198	276	291
Beginning balance	291	198
Provision for loan losses	(15)	85
Charge-offs	(1)	(43)
Recoveries	1	4
Ending balance	276	244
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Individually evaluated for impairment			13	13
Collectively evaluated for impairment			667	697
Allowance for loan losses	680	683	680	710
Beginning balance	710	683
Provision for loan losses	(33)	14
Charge-offs
Recoveries	3	1
Ending balance	680	698
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Individually evaluated for impairment
Collectively evaluated for impairment			407	414
Allowance for loan losses	407	319	407	414
Beginning balance	414	319
Provision for loan losses	147	129
Charge-offs	(196)	(204)
Recoveries	42	44
Ending balance	407	$ 288
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Allowance for loan losses
Beginning balance
Ending balance

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Note 3 - Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Recorded investment with no allowance	$ 3,361		$ 3,168
Unpaid principal balance with no allowance	3,604		3,563
Average recorded investment with no allowance	3,265	$ 3,470
Interest income recognized with no allowance	16	11
Recorded investment with allowance	319		255
Unpaid principal balance with allowance	328		261
Related allowance	117		52
Average recorded investment with allowance	287	240
Interest income recognized with allowance
Recorded investment	3,680		3,423
Unpaid principal balance	3,932		3,824
Average recorded investment	3,552	3,710
Interest income recognized	16	11
Related allowance	117		52
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Recorded investment with no allowance	2,525		2,695
Unpaid principal balance with no allowance	2,760		2,948
Average recorded investment with no allowance	2,610	2,010
Interest income recognized with no allowance	7	8
Recorded investment with allowance	278		212
Unpaid principal balance with allowance	285		218
Related allowance	101		35
Average recorded investment with allowance	245	150
Interest income recognized with allowance
Recorded investment	2,803		2,907
Unpaid principal balance	3,045		3,166
Average recorded investment	2,855	2,160
Interest income recognized	7	8
Related allowance	101		35
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Recorded investment with no allowance	94
Unpaid principal balance with no allowance	95
Average recorded investment with no allowance	47
Interest income recognized with no allowance
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance
Interest income recognized with allowance
Recorded investment	94
Unpaid principal balance	95
Average recorded investment	47
Interest income recognized
Related allowance
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Recorded investment with no allowance
Unpaid principal balance with no allowance
Average recorded investment with no allowance
Interest income recognized with no allowance
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance
Interest income recognized with allowance
Recorded investment
Unpaid principal balance
Average recorded investment
Interest income recognized
Related allowance
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Recorded investment with no allowance	365		401
Unpaid principal balance with no allowance	363		535
Average recorded investment with no allowance	383	1,150
Interest income recognized with no allowance	5	3
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance
Interest income recognized with allowance
Recorded investment	365		401
Unpaid principal balance	363		535
Average recorded investment	383	1,150
Interest income recognized	5	3
Related allowance
Commercial Portfolio Segment [Member]
Recorded investment with no allowance	291		12
Unpaid principal balance with no allowance	292		12
Average recorded investment with no allowance	152	74
Interest income recognized with no allowance	4
Recorded investment with allowance	28		30
Unpaid principal balance with allowance	30		30
Related allowance	3		4
Average recorded investment with allowance	29	59
Interest income recognized with allowance
Recorded investment	319		42
Unpaid principal balance	322		42
Average recorded investment	181	133
Interest income recognized	4
Related allowance	3		4
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Recorded investment with no allowance	78		60
Unpaid principal balance with no allowance	86		68
Average recorded investment with no allowance	69	230
Interest income recognized with no allowance
Recorded investment with allowance	13		13
Unpaid principal balance with allowance	13		13
Related allowance	13		13
Average recorded investment with allowance	13	13
Interest income recognized with allowance
Recorded investment	91		73
Unpaid principal balance	99		81
Average recorded investment	82	243
Interest income recognized
Related allowance	13		13
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Recorded investment with no allowance	8
Unpaid principal balance with no allowance	8
Average recorded investment with no allowance	4	6
Interest income recognized with no allowance
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance		18
Interest income recognized with allowance
Recorded investment	8
Unpaid principal balance	8
Average recorded investment	4	24
Interest income recognized
Related allowance

XML

Note 3 - Loans and Allowance for Loan Losses - Recorded Investment in Nonperforming Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Total Nonperforming Loans	$ 5,271	$ 6,194
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Total Nonperforming Loans	3,736	4,205
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Total Nonperforming Loans	475	281
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Total Nonperforming Loans
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Total Nonperforming Loans	337	518
Commercial Portfolio Segment [Member]
Total Nonperforming Loans	280	197
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Total Nonperforming Loans	166	508
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Total Nonperforming Loans	277	485
Nonperforming Financial Instruments [Member]
Nonaccrual Loans	2,675	2,536
Loans 90+ Days Past Due Still Accruing	179	291
Total Nonperforming Loans	2,854	2,827
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Nonaccrual Loans	2,262	2,298
Loans 90+ Days Past Due Still Accruing	100	109
Total Nonperforming Loans	2,362	2,407
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Nonaccrual Loans	94
Loans 90+ Days Past Due Still Accruing		95
Total Nonperforming Loans	94	95
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Nonaccrual Loans
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Nonaccrual Loans	104	139
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	104	139
Nonperforming Financial Instruments [Member] | Commercial Portfolio Segment [Member]
Nonaccrual Loans	139	42
Loans 90+ Days Past Due Still Accruing	66	59
Total Nonperforming Loans	205	101
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Nonaccrual Loans	76	57
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	76	57
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Nonaccrual Loans
Loans 90+ Days Past Due Still Accruing	13	28
Total Nonperforming Loans	$ 13	$ 28

XML

Note 3 - Loans and Allowance for Loan Losses - Aging of Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Past Due	$ 5,271	$ 6,194
Current	406,547	408,025
Loans	412,218	414,617
Financial Asset Acquired with Credit Deterioration [Member]
Loans	400	398
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	3,736	4,205
Current	130,794	132,405
Loans	134,883	136,960
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans	353	350
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	475	281
Current	20,861	18,028
Loans	21,336	18,309
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Current	25,354	21,034
Loans	25,354	21,034
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due	337	518
Current	95,267	99,774
Loans	95,651	100,340
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans	47	48
Commercial Portfolio Segment [Member]
Past Due	280	197
Current	33,005	34,006
Loans	33,285	34,203
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	166	508
Current	50,422	50,470
Loans	50,588	50,978
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Past Due	277	485
Current	50,844	52,308
Loans	51,121	52,793
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Financing Receivables, 30 to 59 Days Past Due [Member]
Past Due	3,046	4,111
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	2,108	2,612
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	381	186
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due		379
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due	156	46
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	152	468
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Past Due	249	420
Financing Receivables, 60 to 89 Days Past Due [Member]
Past Due	404	451
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	155	338
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due	233
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due		49
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	1	27
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Past Due	15	37
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past Due	1,821	1,632
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	1,473	1,255
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	94	95
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due	104	139
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due	124	102
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	13	13
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Past Due	$ 13	$ 28

XML

Note 3 - Loans and Allowance for Loan Losses - Recorded Investment in Loans by Risk Category (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 412,218	$ 414,617
Pass [Member]
Loans	403,797	405,806
Special Mention [Member]
Loans	2,992	3,623
Substandard [Member]
Loans	2,739	2,640
Doubtful [Member]
Loans	2,690	2,548
Unlikely to be Collected Financing Receivable [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	134,883	136,960
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Pass [Member]
Loans	131,433	133,618
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Special Mention [Member]
Loans	395	348
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Substandard [Member]
Loans	778	684
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Doubtful [Member]
Loans	2,277	2,310
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Loans	21,336	18,309
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Pass [Member]
Loans	21,109	18,003
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Special Mention [Member]
Loans	83	157
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Substandard [Member]
Loans	50	149
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Doubtful [Member]
Loans	94
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Loans	25,354	21,034
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Pass [Member]
Loans	25,125	20,173
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Special Mention [Member]
Loans	229	861
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Substandard [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Doubtful [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Loans	95,651	100,340
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Pass [Member]
Loans	92,367	97,219
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Special Mention [Member]
Loans	1,347	1,362
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Substandard [Member]
Loans	1,833	1,620
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Doubtful [Member]
Loans	104	139
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Commercial Portfolio Segment [Member]
Loans	33,285	34,203
Commercial Portfolio Segment [Member] | Pass [Member]
Loans	32,287	33,245
Commercial Portfolio Segment [Member] | Special Mention [Member]
Loans	786	734
Commercial Portfolio Segment [Member] | Substandard [Member]
Loans	73	182
Commercial Portfolio Segment [Member] | Doubtful [Member]
Loans	139	42
Commercial Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Loans	50,588	50,978
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Pass [Member]
Loans	50,510	50,919
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Special Mention [Member]
Loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Substandard [Member]
Loans	2	2
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Doubtful [Member]
Loans	76	57
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Loans	51,121	52,793
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Pass [Member]
Loans	50,966	52,629
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Special Mention [Member]
Loans	152	161
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Substandard [Member]
Loans	3	3
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Doubtful [Member]
Loans
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans

XML

Note 3 - Loans and Allowance for Loan Losses - Troubled Debt Restructuring by Accrual Status (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Recorded investment in loans	$ 412,218,000	$ 414,617,000
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Recorded investment in loans	134,883,000	136,960,000
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Recorded investment in loans	95,651,000	100,340,000
Commercial Portfolio Segment [Member]
Recorded investment in loans	33,285,000	34,203,000
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Recorded investment in loans	50,588,000	50,978,000
Nonperforming Financial Instruments [Member]
TDR accruing	1,032,000	858,000
TDR nonaccrual	106,000	106,000
Recorded investment in loans	1,138,000	964,000
TDR related allowance for loan losses	0
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
TDR accruing	484,000	487,000
TDR nonaccrual	106,000	106,000
Recorded investment in loans	590,000	593,000
TDR related allowance for loan losses
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
TDR accruing	354,000	356,000
TDR nonaccrual
Recorded investment in loans	354,000	356,000
TDR related allowance for loan losses
Nonperforming Financial Instruments [Member] | Commercial Portfolio Segment [Member]
TDR accruing	179,000
TDR nonaccrual
Recorded investment in loans	179,000
TDR related allowance for loan losses
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
TDR accruing	15,000	15,000
TDR nonaccrual
Recorded investment in loans	15,000	15,000
TDR related allowance for loan losses

XML

Note 3 - Loans and Allowance for Loan Losses - Summary of Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017
Number of contracts	1	0
Pre-modification outstanding balance	$ 179
Post-modification outstanding balance	$ 179
Commercial Portfolio Segment [Member]
Number of contracts	1
Pre-modification outstanding balance	$ 179
Post-modification outstanding balance	$ 179

XML

Note 3 - Loans and Allowance for Loan Losses - Summary of PCI Loans (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Carrying amount	$ 400,000	$ 398,000
Allowance for loan losses	0	2,000
Carrying amount, net of allowance	400,000	396,000
Residential Mortgage Segment [Member] | Residential Loan [Member]
Carrying amount	353,000	350,000
Residential Mortgage Segment [Member] | Commercial Real Estate Loan [Member]
Carrying amount	$ 47,000	$ 48,000

XML

Note 3 - Loans and Allowance for Loan Losses - Accretable Yield, or Income Expected to be Collected (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Balance at beginning of period	$ 470	$ 252
New loans purchased
Accretion to income	(14)	(14)
Disposals and other adjustments
Reclassification from nonaccretable difference	3	6
Balance at end of period	$ 459	$ 244

XML

Note 4 - Qualified Affordable Housing Project Investment (Details Textual)	3 Months Ended
	Mar. 31, 2018 USD ($)
Affordable Housing Tax Credits and Other Tax Benefits, Amount	$ 98,000
Income Tax Expense (Benefit) [Member]
Amortization Method Qualified Affordable Housing Project Investments, Amortization	82,000
Other Assets [Member]
Amortization Method Qualified Affordable Housing Project Investments	3,900,000
Other Liabilities [Member]
Qualified Affordable Housing Project Investments, Commitment	$ 3,500,000

XML

Note 5 - Supplemental Disclosure for Earnings Per Share (Details Textual) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0

XML

Note 5 - Supplemental Disclosure for Earnings Per Share - Supplemental Disclosure for Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income attributable to First Capital, Inc.	$ 2,133	$ 1,553
Weighted average common shares outstanding (in shares)	3,326,464	3,342,052
Basic (in dollars per share)	$ 0.64	$ 0.46
Add: Dilutive effect of restricted stock (in shares)	5,671	5,070
Weighted average common shares outstanding, as adjusted (in shares)	3,332,135	3,347,122
Net income attributable to First Capital, Inc. per common share, diluted (in dollars per share)	$ 0.64	$ 0.46

XML

Note 6 - Stock Option Plan (Details Textual) - USD ($)				3 Months Ended
	Feb. 20, 2018	Feb. 17, 2015	May 20, 2009	Mar. 31, 2018	Mar. 31, 2017
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				20,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value				$ 37.42
Allocated Share-based Compensation Expense, Total				$ 49,000	$ 21,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total				$ 911,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				5 years 91 days
Restricted Stock [Member] | Officers, Directors and Key Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	20,000	19,500
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 37.42	$ 24.50
Stock Issued During Period, Value, Restricted Stock Award, Gross	$ 748,000	$ 478,000
Restricted Stock [Member] | Officers, Directors and Key Employees [Member] | Vesting Each Year on July 1, Beginning in 2019 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	20.00%
Equity Incentive Plan 2009 [Member]
Maximum Fair Value of First Exercisable Stock Incentive Options			$ 100,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				0
Equity Incentive Plan 2009 [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			223,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant				184,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years

XML

Note 6 - Stock Option Plan - Summary of Nonvested Restricted Shares (Details) - Restricted Stock [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Nonvested, Weighted Number of Shares (in shares) | shares	10,500
Nonvested, Average Grant Date Fair Value (in dollars per share) | $ / shares	$ 24.50
Granted, Weighted Number of Shares (in shares) | shares	20,000
Granted, Average Grant Date Fair Value (in dollars per share) | $ / shares	$ 37.42
Vested, Weighted Number of Shares (in shares) | shares
Vested, Average Grant Date Fair Value (in dollars per share) | $ / shares
Forfeited, Weighted Number of Shares (in shares) | shares	0
Forfeited, Average Grant Date Fair Value (in dollars per share) | $ / shares	$ 0
Nonvested, Weighted Number of Shares (in shares) | shares	30,500
Nonvested, Average Grant Date Fair Value (in dollars per share) | $ / shares	$ 32.97

XML

Note 7 - Supplemental Disclosures of Cash Flow Information - Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash payments for:
Interest	$ 351	$ 370
Taxes (net of refunds received)	0	0
Noncash investing activities:
Transfers from loans to real estate acquired through foreclosure	$ 27	$ 194

XML

Note 8 - Fair Value Measurements (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Financial and Nonfinancial Liabilities, Fair Value Disclosure	$ 0		$ 0
Provision for Loan and Lease Losses, Total	197,000	$ 211,000
Impaired Loan [Member]
Provision for Loan and Lease Losses, Total	65,000	2,000
Foreclosed Real Estate [Member]
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate, Write-down or Reserve, Amount	$ 0	$ 228,000
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Minimum [Member]
Fair Value Inputs, Estimated Selling Costs	14.00%		14.00%
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Maximum [Member]
Fair Value Inputs, Estimated Selling Costs	62.00%		62.00%
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Weighted Average [Member]
Fair Value Inputs, Estimated Selling Costs	39.00%		39.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Minimum [Member]
Fair Value Inputs, Estimated Selling Costs	10.00%		17.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Maximum [Member]
Fair Value Inputs, Estimated Selling Costs	76.00%		75.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Weighted Average [Member]
Fair Value Inputs, Estimated Selling Costs	44.00%		45.00%

XML

Note 8 - Fair Value Measurements - Assets Measured at Fair Value on Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available for sale	$ 264,843	$ 271,172
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	106,745	112,649
Agency Collateralized Mortgage Obligations [Member]
Securities available for sale	18,249	15,323
US Government Agencies Debt Securities [Member]
Securities available for sale	69,048	69,028
Municipal Notes [Member]
Securities available for sale	70,801	74,172
Fair Value, Measurements, Recurring [Member]
Securities available for sale	264,843	271,172
Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	106,745	112,649
Fair Value, Measurements, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale	18,249	15,323
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale	69,048	69,028
Fair Value, Measurements, Recurring [Member] | Municipal Notes [Member]
Securities available for sale	70,801	74,172
Fair Value, Measurements, Nonrecurring [Member]
Impaired loans	3,563	3,371
Loans held for sale	2,141	2,630
Foreclosed real estate	3,809	3,971
Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans	2,702	2,872
Foreclosed real estate	281	443
Fair Value, Measurements, Nonrecurring [Member] | Land Segment [Member]
Impaired loans	94
Fair Value, Measurements, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans	365	401
Foreclosed real estate	3,528	3,528
Fair Value, Measurements, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans	316	38
Fair Value, Measurements, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans	78	60
Fair Value, Measurements, Nonrecurring [Member] | Other Consumer Segment [Member]
Impaired loans	8
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Notes [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Impaired loans
Loans held for sale
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Land Segment [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Consumer Segment [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Securities available for sale	264,843	271,172
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	106,745	112,649
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale	18,249	15,323
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale	69,048	69,028
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Notes [Member]
Securities available for sale	70,801	74,172
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Impaired loans
Loans held for sale	2,141	2,630
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Land Segment [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Consumer Segment [Member]
Impaired loans
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Municipal Notes [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Impaired loans	3,563	3,371
Loans held for sale
Foreclosed real estate	3,809	3,971
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans	2,702	2,872
Foreclosed real estate	281	443
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Land Segment [Member]
Impaired loans	94
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans	365	401
Foreclosed real estate	3,528	3,528
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans	316	38
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans	78	$ 60
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | Other Consumer Segment [Member]
Impaired loans	$ 8

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Note 8 - Fair Value Measurements - Carrying Value and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial assets:
Securities available for sale	$ 264,843	$ 271,172
Securities held to maturity		1
Reported Value Measurement [Member]
Financial assets:
Cash and cash equivalents	39,485	25,915
Interest-bearing time deposits	8,019	9,258
Securities available for sale	264,843	271,172
Loans held for sale	2,141	2,630
Loans, net	407,279	409,618
FHLB and other stock	1,979	1,979
Accrued interest receivable	2,650	2,694
Deposits	681,571	664,562
Accrued interest payable	98	107
Securities held to maturity		1
FHLB Advances		10,000
Estimate of Fair Value Measurement [Member]
Financial assets:
Cash and cash equivalents	39,485	25,915
Interest-bearing time deposits	7,944	9,220
Securities available for sale	264,843	271,172
Loans held for sale	2,186	2,678
Loans, net	402,059	404,931
Accrued interest receivable	2,650	2,694
Deposits	679,700	663,006
Accrued interest payable	98	107
Securities held to maturity		1
FHLB Advances		10,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	39,485	25,915
Interest-bearing time deposits
Securities available for sale
Loans held for sale
Loans, net
Accrued interest receivable
Deposits
Accrued interest payable
Securities held to maturity
FHLB Advances
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Cash and cash equivalents
Interest-bearing time deposits	7,944	9,220
Securities available for sale	264,843	271,172
Loans held for sale	2,186	2,678
Loans, net
Accrued interest receivable	2,650	2,694
Deposits
Accrued interest payable	98	107
Securities held to maturity		1
FHLB Advances		10,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Cash and cash equivalents
Interest-bearing time deposits
Securities available for sale
Loans held for sale
Loans, net	402,059	404,931
Accrued interest receivable
Deposits	679,700	663,006
Accrued interest payable
Securities held to maturity
FHLB Advances

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Note 9 - Revenue from Contracts with Customers - Noninterest Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Noninterest income, financial service	$ 1,197	$ 1,115
Gain on sale of loans and securities	241	257
Increase in cash value of life insurance	43	41
Other	45	40
Other noninterest income	329	338
Total noninterest income	1,526	1,453
Deposit Account [Member]
Noninterest income, financial service	1,109	1,001
Investment Advisory, Management and Administrative Service [Member]
Noninterest income, financial service	$ 88	$ 114