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 June 30, 2019

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 every Interactive Data File required to be submitted 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 smaller 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.

Large accelerated filer	[   ]	Accelerated filer	[X]
Non-accelerated filer	[   ]	Smaller reporting company	[X]
		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_

Securities registered pursuant to Section 12(b) of the Act:
	Title of each class	Trading Symbol(s)	Name of each exhange on which registered
	Common stock, par value $0.01 per share	FCAP	The NASDAQ Stock Market LLC

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 3,363,632 shares of common stock were outstanding as of July 26, 2019.

FIRST CAPITAL, INC.

INDEX

Part I	Financial Information	Page
	Item 1. Consolidated Financial Statements
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 (unaudited)	3
	Consolidated Statements of Income for the three months and six months ended June 30, 2019 and 2018 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2019 and 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8-40
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	41-46
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	47-50
	Item 4. Controls and Procedures	50
Part II	Other Information
	Item 1. Legal Proceedings	51
	Item 1A .Risk Factors	51
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3. Defaults Upon Senior Securities	51
	Item 4. Mine Safety Disclosures	51
	Item 5. Other Information	51
	Item 6. Exhibits	52
Signatures

- 2 -

PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			December 31,
	2019			2018
	(In thousands)
ASSETS
Cash and due from banks	$	21,825		$	17,394
Interest bearing deposits with banks		3,730			1,717
Federal funds sold		34,971			22,001
Total cash and cash equivalents		60,526			41,112
Interest-bearing time deposits		6,245			7,710
Securities available for sale, at fair value		259,445			261,841
Loans, net		459,928			434,260
Loans held for sale		3,962			2,849
Federal Home Loan Bank and other stock, at cost		1,988			1,988
Foreclosed real estate		2,909			3,142
Premises and equipment		14,546			14,364
Accrued interest receivable		2,987			2,828
Cash value of life insurance		8,177			8,059
Goodwill		6,472			6,472
Core deposit intangible		892			966
Other assets		6,841			8,571
Total Assets	$	834,918		$	794,162
LIABILITIES
Deposits:
Noninterest-bearing	$	158,591		$	143,249
Interest-bearing		576,036			558,397
Total deposits		734,627			701,646
Accrued interest payable		172			150
Accrued expenses and other liabilities		5,689			6,410
Total liabilities		740,488			708,206
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 3,791,283 shares (3,781,533 in 2018); outstanding 3,364,460 shares (3,354,744 in 2018)		38			38
Additional paid-in capital		40,723			40,215
Retained earnings-substantially restricted		61,563			58,137
Unearned stock compensation		(1,110	)		(720	)
Accumulated other comprehensive income (loss)		1,462			(3,477	)
Less treasury stock, at cost - 426,823 shares (426,789 in 2018)		(8,351	)		(8,349	)
Total First Capital, Inc. stockholders' equity		94,325			85,844
Noncontrolling interest in subsidiary		105			112
Total equity		94,430			85,956
Total Liabilities and Equity	$	834,918		$	794,162

See accompanying notes to consolidated financial statements.      

- 3 -

PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
INTEREST INCOME	(In thousands, except per share data)
Loans, including fees	$	6,555		$	5,558		$	12,612		$	10,859
Securities:
Taxable		964			945			1,948			1,897
Tax-exempt		421			361			812			739
Dividends		30			21			56			54
Other interest income		249			178			449			278
Total interest income		8,219			7,063			15,877			13,827
INTEREST EXPENSE
Deposits		491			395			947			716
Advances from Federal Home Loan Bank		-			-			-			21
Total interest expense		491			395			947			737
Net interest income		7,728			6,668			14,930			13,090
Provision for loan losses		300			316			750			513
Net interest income after provision for loan losses		7,428			6,352			14,180			12,577
NONINTEREST INCOME
Service charges on deposit accounts		516			545			977			1,054
ATM and debit card fees		729			643			1,376			1,243
Commission and fee income		146			130			244			218
Loss on sale of securities available for sale and time deposits		-			(96	)		(97	)		(95	)
Unrealized gain (loss) on equity securities		(14	)		-			117			-
Gain on sale of loans		260			290			418			530
Increase in cash surrender value of life insurance		70			85			118			128
Other income		61			139			120			184
Total noninterest income		1,768			1,736			3,273			3,262
NONINTEREST EXPENSE
Compensation and benefits		3,208			2,942			6,250			5,836
Occupancy and equipment		395			414			792			827
Data processing		869			764			1,707			1,508
Professional fees		177			181			406			359
Advertising		159			103			248			188
Net loss on foreclosed real estate		93			400			288			521
Other expenses		863			893			1,738			1,712
Total noninterest expense		5,764			5,697			11,429			10,951
Income before income taxes		3,432			2,391			6,024			4,888
Income tax expense		568			287			1,010			648
Net Income		2,864			2,104			5,014			4,240
Less: net income attributable to noncontrolling interest in subsidiary		4			4			7			7
Net Income Attributable to First Capital, Inc.	$	2,860		$	2,100		$	5,007		$	4,233
Earnings per common share attributable to First Capital, Inc.:
Basic	$	0.86		$	0.63		$	1.50		$	1.27
Diluted	$	0.86		$	0.63		$	1.50		$	1.27
Dividends per share	$	0.24		$	0.23		$	0.47		$	0.46

See accompanying notes to consolidated financial statements.

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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In thousands)
Net Income	$	2,864		$	2,104		$	5,014		$	4,240
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period		4,126			(636	)		6,473			(4,651	)
Income tax (expense) benefit		(1,026	)		158			(1,610	)		1,157
Net of tax amount		3,100			(478	)		4,863			(3,494	)
Less:reclassification adjustment for realized losses included in net income		-			96			97			95
Income tax benefit		-			(23	)		(21	)		(23	)
Net of tax amount		-			73			76			72
Other Comprehensive Income (Loss), net of tax		3,100			(405	)		4,939			(3,422	)
Comprehensive Income		5,964			1,699			9,953			818
Less:comprehensive income attributable to the noncontrolling interest in subsidiary		4			4			7			7
Comprehensive Income Attributable to First Capital, Inc.	$	5,960		$	1,695		$	9,946		$	811

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)

								Accumulated
			Additional					Other			Unearned
	Common		Paid-in		Retained			Comprehensive			Stock			Treasury			Noncontrolling
(In thousands, except share and per share data)	Stock		Capital		Earnings			Income (Loss)			Compensation			Stock			Interest			Total
Balances at January 1, 2018	$	38	$	39,515	$	51,972		$	(2,060	)	$	(212	)	$	(8,315	)	$	112		$	81,050
Net income		-		-		4,233			-			-			-			7			4,240
Other comprehensive loss		-		-		-			(3,422	)		-			-			-			(3,422	)
Cash dividends		-		-		(1,544	)		-			-			-			(14	)		(1,558	)
Restricted stock grants		-		748		-			-			(748	)		-			-			-
Stock compensation expense		-		-		-			-			106			-			-			106
Balances at June 30, 2018	$	38	$	40,263	$	54,661		$	(5,482	)	$	(854	)	$	(8,315	)	$	105		$	80,416
Balances at January 1, 2019	$	38	$	40,215	$	58,137		$	(3,477	)	$	(720	)	$	(8,349	)	$	112		$	85,956
Net income		-		-		5,007			-			-			-			7			5,014
Other comprehensive income		-		-		-			4,939			-			-			-			4,939
Cash dividends		-		-		(1,581	)		-			-			-			(14	)		(1,595	)
Restricted stock grants		-		508		-			-			(508	)		-			-			-
Stock compensation expense		-		-		-			-			118			-			-			118
Purchase of 34 treasury shares		-		-		-			-			-			(2	)		-			(2	)
Balances at June 30, 2019	$	38	$	40,723	$	61,563		$	1,462		$	(1,110	)	$	(8,351	)	$	105		$	94,430

See accompanying notes to consolidated financial statements.

- 6 -

PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES	(In thousands)
Net income	$	5,014		$	4,240
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		804			850
Depreciation and amortization expense		526			620
Deferred income taxes		(240	)		(327	)
Stock compensation expense		118			106
Increase in cash value of life insurance		(118	)		(128	)
Gain on life insurance		-			(94	)
Loss on sale of securities and time deposits		97			95
Provision for loan losses		750			513
Proceeds from sales of loans		22,264			26,679
Loans originated for sale		(22,959	)		(25,575	)
Gain on sale of loans		(418	)		(530	)
Amortization of tax credit investment		169			164
Unrealized gain on equity securities		(117	)		-
Net realized and unrealized loss on foreclosed real estate		273			466
(Increase) decrease in accrued interest receivable		(159	)		18
Increase in accrued interest payable		22			6
Net change in other assets/liabilities		73			(799	)
Net Cash Provided By Operating Activities		6,099			6,304
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of interest-bearing time deposits		1,180			1,488
Proceeds from sales of interest-bearing time deposits		1,460			-
Purchase of interest-bearing time deposits		(1,185	)		-
Purchase of securities available for sale		(31,956	)		(13,657	)
Proceeds from maturities of securities available for sale		22,645			870
Proceeds from sales of securities available for sale		5,437			14,345
Principal collected on mortgage-backed obligations		11,835			12,742
Investment in cash value of life insurance		-			(1,000	)
Net increase in loans receivable		(26,535	)		(10,355	)
Investment in tax credit entities		(392	)		(691	)
Proceeds from sale of foreclosed real estate		77			214
Purchase of Federal Home Loan Bank stock		-			(9	)
Purchase of premises and equipment		(635	)		(123	)
Proceeds from settlement of bank-owned life insurance policies		-			127
Net Cash Provided By (Used In) Investing Activities		(18,069	)		3,951
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		32,981			37,274
Repayment of advances from Federal Home Loan Bank		-			(10,000	)
Purchase of treasury stock		(2	)		-
Dividends paid		(1,595	)		(1,558	)
Net Cash Provided By Financing Activities		31,384			25,716
Net Increase in Cash and Cash Equivalents		19,414			35,971
Cash and cash equivalents at beginning of period		41,112			25,915
Cash and Cash Equivalents at End of Period	$	60,526		$	61,886

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 financial holding company for First Harrison Bank (“Bank”), an Indiana chartered commercial 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 eight 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.

In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary to present fairly the financial position as of June 30, 2019, and the results of operations for the three months and six months ended June 30, 2019 and 2018 and the cash flows for the six months ended June 30, 2019 and 2018. 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, 2018 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.

- 8 -

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 June 30, 2019 and December 31, 2018 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
June 30, 2019
Securities available for sale:
Agency mortgage-backed securities	$	85,363	$	85	$	790	$	84,658
Agency CMO		40,181		212		167		40,226
Other debt securities:
Agency notes and bonds		64,219		480		240		64,459
Municipal obligations		67,823		2,285		6		70,102
Total securities available for sale	$	257,586	$	3,062	$	1,203	$	259,445
December 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	94,746	$	-	$	3,489	$	91,257
Agency CMO		33,222		152		382		32,992
Other debt securities:
Agency notes and bonds		75,461		59		1,016		74,504
Municipal obligations		63,008		651		571		63,088
Total securities available for sale	$	266,437	$	862	$	5,458	$	261,841

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.

- 9 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2 – continued)

The amortized cost and fair value of debt securities as of June 30, 2019, 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		Fair
	Cost		Value
(In thousands)
Due in one year or less	$	22,421	$	22,316
Due after one year through five years		50,972		51,415
Due after five years through ten years		32,877		33,809
Due after ten years		25,772		27,021
		132,042		134,561
Mortgage-backed securities and CMO		125,544		124,884
	$	257,586	$	259,445

Information pertaining to investment securities available for sale with gross unrealized losses at June 30, 2019, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency CMO		3	$	3,792	$	33
Total less than twelve months		3		3,792		33
Continuous loss position more than twelve months:
Agency mortgage-backed securities		74		72,485		790
Agency CMO		20		10,939		134
Agency notes and bonds		13		45,138		240
Municipal obligations		5		1,864		6
Total more than twelve months		112		130,426		1,170
Total securities available for sale		115	$	134,218	$	1,203

- 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, 2018, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		1	$	1,563	$	13
Agency CMO		4		2,870		1
Agency notes and bonds		1		499		1
Municipal obligations		11		3,552		12
Total less than twelve months		17		8,484		27
Continuous loss position more than twelve months:
Agency mortgage-backed securities		97		89,680		3,476
Agency CMO		24		12,168		381
Agency notes and bonds		22		67,927		1,015
Municipal obligations		49		25,316		559
Total more than twelve months		192		195,091		5,431
Total securities available for sale		209	$	203,575	$	5,458

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 June 30, 2019, 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 0.9% 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 June 30, 2019, additional deterioration in market and economic conditions may have an adverse impact on credit quality in the future.

- 11 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(2 – continued)

During the six months ended June 30, 2019, the Company realized gross losses of $86,000 on sales of available for sale securities and gross losses of $11,000 on sales of time deposits. There were no sales during the three months ended June 30, 2019. During the three months ended June 30, 2018, the Company realized gross gains of $211,000 and gross losses of $307,000 on sales of available for sale securities. During the six months ended June 30, 2018, the Company realized gross gains of $218,000 and gross losses of $313,000 on sales of available for sale securities.

Certain available for sale debt securities were pledged to secure public fund deposits at June 30, 2019 and December 31, 2018.

Equity Securities

In September 2018, the Company acquired 90,000 shares of common stock in another bank holding company, representing approximately 5% of the outstanding common stock of the entity, for a total investment of $1.9 million. During the three months ended June 30, 2019, the Company recognized an unrealized loss of $14,000 on this equity investment. During the six months ended June 30, 2019, the Company recognized an unrealized gain of $117,000 on this equity investment. At June 30, 2019 and December 31, 2018, the equity investment had a fair value of $1.8 million and $1.7 million, respectively, and is included in other assets on the consolidated balance sheets.

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 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.

- 12 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

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.

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 loans not considered to 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 for qualitative factors that are reviewed on a quarterly basis based on the risks present for each portfolio segment. Management considers changes and trends in the following qualitative loss factors: underwriting standards, economic conditions, changes and trends in past due and classified loans, collateral valuations, loan concentrations 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 June 30, 2019 and December 31, 2018.

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, 2018.

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 June 30, 2019 and December 31, 2018, the balance of foreclosed real estate includes $84,000 and $33,000, respectively, of residential real estate properties where physical possession has been obtained. At June 30, 2019 and December 31, 2018, the recorded investment in loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $329,000 and $365,000, respectively.

Loans at June 30, 2019 and December 31, 2018 consisted of the following:

	June 30,			December 31,
(In thousands)	2019			2018
Real estate mortgage loans:
Residential	$	140,035		$	136,445
Land		22,584			22,607
Residential construction		32,639			31,459
Commercial real estate		111,862			107,445
Commercial real estate construction		20,797			20,591
Commercial business loans		41,621			36,297
Consumer loans:
Home equity and second mortgage loans		54,220			51,731
Automobile loans		44,870			42,124
Loans secured by savings accounts		1,354			1,399
Unsecured loans		3,598			3,638
Other consumer loans		10,473			10,169
Gross loans		484,053			463,905
Less undisbursed portion of loans in process		(20,644	)		(26,675	)
Principal loan balance		463,409			437,230
Deferred loan origination fees, net		1,128			1,095
Allowance for loan losses		(4,609	)		(4,065	)
Loans, net	$	459,928		$	434,260

- 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 June 30, 2019:

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	140,035	$	22,584	$	32,792		$	111,862		$	41,621	$	54,220	$	60,295	$	463,409
Accrued interest receivable		488		97		108			264			137		263		257		1,614
Net deferred loan origination fees and costs		118		18		(7	)		(44	)		-		1,043		-		1,128
Recorded investment in loans	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	1,870	$	192	$	-		$	882		$	400	$	28	$	4	$	3,376
Collectively evaluated for impairment		138,488		22,507		32,893			111,157			41,358		55,498		60,548		462,449
Acquired with deteriorated credit quality		283		-		-			43			-		-		-		326
Ending balance	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151

- 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, 2018:

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,445	$	22,607	$	25,375		$	107,445		$	36,297	$	51,731	$	57,330	$	437,230
Accrued interest receivable		475		119		76			265			120		247		228		1,530
Net deferred loan origination fees and costs		99		18		(9	)		(38	)		-		1,025		-		1,095
Recorded investment in loans	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,184	$	152	$	521		$	466		$	427	$	35	$	-	$	3,785
Collectively evaluated for impairment		134,553		22,592		24,921			107,158			35,990		52,968		57,558		435,740
Acquired with deteriorated credit quality		282		-		-			48			-		-		-		330
Ending balance	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855

- 17 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

An analysis of the allowance for loan losses as of June 30, 2019 is as follows:

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2	$	-	$	-	$	32	$	-	$	-	$	-	$	34
Collectively evaluated for impairment		752		170		316		1,420		596		472		849		4,575
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	754	$	170	$	316	$	1,452	$	596	$	472	$	849	$	4,609

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

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	-	$	-	$	44	$	1	$	-	$	-	$	48
Collectively evaluated for impairment		690		162		224		1,357		458		443		683		4,017
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	693	$	162	$	224	$	1,401	$	459	$	443	$	683	$	4,065

- 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 and six months ended June 30, 2019 is as follows:

	Residential							Commercial		Commercial		Home Equity  &			Other
	Real Estate			Land		Construction		Real Estate		Business		2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2019
Beginning balance	$	727		$	164	$	291	$	1,391	$	541	$	450		$	775		$	4,339
Provisions for loan losses		4			6		25		61		55		20			129			300
Charge-offs		(92	)		-		-		-		-		(2	)		(119	)		(213	)
Recoveries		115			-		-		-		-		4			64			183
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609
Changes in Allowance for Loan Losses for the six-months ended June 30, 2019
Beginning balance	$	693		$	162	$	224	$	1,401	$	459	$	443		$	683		$	4,065
Provisions for loan losses		75			8		92		51		137		25			362			750
Charge-offs		(130	)		-		-		-		-		(2	)		(300	)		(432	)
Recoveries		116			-		-		-		-		6			104			226
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609

- 19 -

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 and six months ended June 30, 2018 is as follows:

	Residential									Commercial			Commercial			Home Equity  &			Other
	Real Estate			Land			Construction			Real Estate			Business			2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2018
Beginning balance	$	301		$	156		$	291		$	1,520		$	276		$	680		$	407		$	3,631
Provisions for loan losses		398			(8	)		(75	)		(237	)		141			(75	)		172			316
Charge-offs		(15	)		0			0			0			0			(13	)		(138	)		(166	)
Recoveries		4			0			0			23			0			15			44			86
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867
Changes in Allowance for Loan Losses for the six-months ended June 30, 2018
Beginning balance	$	219		$	133		$	245		$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		538			15			(29	)		(348	)		126			(109	)		320			513
Charge-offs		(75	)		0			0			0			(1	)		(12	)		(334	)		(422	)
Recoveries		6			0			0			32			1			18			85			142
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867

- 20 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

At June 30, 2019 and December 31, 2018, management applied qualitative factor adjustments to various portfolio segments which increased the estimated allowance for loan losses related to those portfolio segments by approximately $3.3 million and $3.1 million, respectively. These changes were made to reflect management’s estimates of inherent losses in these portfolio segments at June 30, 2019 and December 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 $320,000 and $333,000 at June 30, 2019 and December 31, 2018, respectively. These factors were not adjusted during the period from December 31, 2018 to June 30, 2019.

Additional discussion of the Bank’s allowance for loan loss methodology can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

- 21 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s impaired loans as of June 30, 2019 and for the three months and six months ended June 30, 2019. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the three or six month periods ended June 30, 2019:

	At June 30, 2019						Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	1,857	$	2,120	$	-	$	2,025	$	3	$	2,073	$	6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		683		692		-		467		8		396		11
Commercial business		374		427		-		385		3		390		6
Home equity/2nd mortgage		28		38		-		27		-		29		-
Other consumer		4		-		-		2		-		1		-
		3,138		3,471		-		3,360		14		3,416		23
Loans with an allowance recorded:
Residential		13		14		2		75		-		55		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		199		208		32		203		-		135		-
Commercial business		26		30		-		26		-		88		-
Home equity/2nd mortgage		-		-		-		-		-		9		-
Other consumer		-		-		-		-		-		-		-
		238		252		34		304		-		287		-
Total:
Residential		1,870		2,134		2		2,100		3		2,128		6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		882		900		32		670		8		531		11
Commercial business		400		457		-		411		3		478		6
Home equity/2nd mortgage		28		38		-		27		-		38		-
Other consumer		4		-		-		2		-		1		-
	$	3,376	$	3,723	$	34	$	3,664	$	14	$	3,703	$	23

- 22 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s impaired loans for the three months and six months ended June 30, 2018. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the three or six month periods ended June 30, 2018:

	Three Months Ended June 30, 2018				Six  Months Ended June 30, 2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Loans with no related allowance recorded:
Residential	$	2,327	$	5	$	2,449	$	13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		254		4		173		7
Home equity/2nd mortgage		77		0		71		1
Other consumer		8		1		5		1
		3,192		15		3,182		32
Loans with an allowance recorded:
Residential		267		0		248		0
Land		0		0		0		0
Construction		0		0		0		0
Commercial real estate		0		0		0		0
Commercial business		28		0		29		0
Home equity/2nd mortgage		7		0		9		0
Other consumer		0		0		0		0
		302		0		286		0
Total:
Residential		2,594		5		2,697		13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		282		4		202		7
Home equity/2nd mortgage		84		0		80		1
Other consumer		8		1		5		1
	$	3,494	$	15	$	3,468	$	32

- 23 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3 – continued)

The following table summarizes the Company’s impaired loans as of December 31, 2018:

			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,170	$	2,409	$	-
Land		152		153		-
Construction		521		521		-
Commercial real estate		255		260		-
Commercial business		400		451		-
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
		3,533		3,838		-
Loans with an allowance recorded:
Residential		14		15		3
Land		-		-		-
Construction		-		-		-
Commercial real estate		211		213		44
Commercial business		27		30		1
Home equity/2nd mortgage		-		-		-
Other consumer		-		-		-
		252		258		48
Total:
Residential		2,184		2,424		3
Land		152		153		-
Construction		521		521		-
Commercial real estate		466		473		44
Commercial business		427		481		1
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
	$	3,785	$	4,096	$	48

- 24 -

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 June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
			Loans 90+ Days		Total				Loans 90+ Days		Total
	Nonaccrual		Past Due		Nonperforming		Nonaccrual		Past Due		Nonperforming
	Loans		Still Accruing		Loans		Loans		Still Accruing		Loans
	(In thousands)
Residential	$	1,713	$	76	$	1,789	$	1,769	$	-	$	1,769
Land		192		-		192		152		-		152
Construction		-		-		-		521		-		521
Commercial real estate		351		-		351		371		-		371
Commercial business		198		-		198		207		-		207
Home equity/2nd mortgage		28		-		28		35		-		35
Other consumer		-		5		5		-		2		2
Total	$	2,482	$	81	$	2,563	$	3,055	$	2	$	3,057

The following table presents the aging of the recorded investment in loans at June 30, 2019:

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	3,254	$	620	$	1,168	$	5,042	$	135,316	$	283	$	140,641
Land		163		104		156		423		22,276		-		22,699
Construction		-		-		-		-		32,893		-		32,893
Commercial real estate		346		-		-		346		111,693		43		112,082
Commercial business		63		55		143		261		41,497		-		41,758
Home equity/2nd mortgage		288		-		28		316		55,210		-		55,526
Other consumer		391		7		5		403		60,149		-		60,552
Total	$	4,505	$	786	$	1,500	$	6,791	$	459,034	$	326	$	466,151

- 25 -

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, 2018:

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	2,617	$	926	$	1,189	$	4,732	$	132,005	$	282	$	137,019
Land		247		39		152		438		22,306		-		22,744
Construction		-		-		-		-		25,442		-		25,442
Commercial real estate		450		-		-		450		107,174		48		107,672
Commercial business		377		-		145		522		35,895		-		36,417
Home equity/2nd mortgage		191		-		35		226		52,777		-		53,003
Other consumer		491		50		2		543		57,015		-		57,558
Total	$	4,373	$	1,015	$	1,523	$	6,911	$	432,614	$	330	$	439,855

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.

- 26 -

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						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
June 30, 2019
Pass	$	137,676	$	22,051	$	32,698	$	109,023	$	40,665	$	55,416	$	60,552	$	458,081
Special Mention		48		330		195		1,742		633		-		-		2,948
Substandard		1,131		126		-		966		262		82		-		2,567
Doubtful		1,786		192		-		351		198		28		-		2,555
Loss		-		-		-		-		-		-		-		-
Total	$	140,641	$	22,699	$	32,893	$	112,082	$	41,758	$	55,526	$	60,552	$	466,151
December 31, 2018
Pass	$	133,878	$	22,458	$	24,921	$	104,843	$	35,162	$	52,859	$	57,529	$	431,650
Special Mention		133		65		-		1,520		763		-		29		2,510
Substandard		1,168		69		-		938		285		109		-		2,569
Doubtful		1,840		152		521		371		207		35		-		3,126
Loss		-		-		-		-		-		-		-		-
Total	$	137,019	$	22,744	$	25,442	$	107,672	$	36,417	$	53,003	$	57,558	$	439,855

- 27 -

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 June 30, 2019 and December 31, 2018:

	June 30, 2019								December 31, 2018
							Related Allowance								Related Allowance
	Accruing		Nonaccrual		Total		for Loan Losses		Accruing		Nonaccrual		Total		for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	145	$	290	$	435	$	-	$	295	$	302	$	597	$	-
Commercial real estate		529		347		876		32		190		371		561		44
Commercial business		202		-		202		-		218		-		218		-
Total	$	876	$	637	$	1,513	$	32	$	703	$	673	$	1,376	$	44

At June 30, 2019 and December 31, 2018, there were no commitments to lend additional funds to debtors whose loan terms have been modified in a TDR.

The Company restructured two commercial real estate loans during the three and six months ended June 30, 2019, with pre-modification and post-modification aggregate balances of $436,000. The Company restructured one commercial business loan during the six months ended June 30, 2018, with a pre-modification and post-modification balance of $179,000. There were no TDRs that were restructured during the three months ended June 30, 2018. For the TDRs restructured in 2019 and 2018, the terms of modification included an extension and the deferral of contractual principal payments.

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 and six months ended June 30, 2019 or 2018.

- 28 -

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 and six months ended June 30, 2019 and 2018. 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. The Company did not recognize any provisions for loan losses or net charge-offs as a result of defaulted TDRs for the three and six months ended June 30, 2019 and 2018.

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 June 30, 2019 and December 31, 2018:

	June 30,		December 31,
(In thousands)	2019		2018
Residential real estate	$	283	$	282
Commercial real estate		43		48
Carrying amount		326		330
Allowance for loan losses		-		-
Carrying amount, net of allowance	$	326	$	330

The outstanding balance of PCI loans accounted for under ASC 310-30, including contractual principal, interest, fees and penalties was $503,000 and $519,000 at June 30, 2019 and December 31, 2018, respectively.

There was no allowance for loan losses related to PCI loans at June 30, 2019 and December 31, 2018. There was a $2,000 reduction of the allowance for loan losses related to PCI loans for the six-month period ended June 30, 2018. There were no net provisions for loans losses related to PCI loans for the three-month period ended June 30, 2018 or for the three-month or six-month periods ended June 30, 2019.

- 29 -

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 and six month periods ended June 30, 2019 and 2018:

	Three Months Ended						Six Months Ended
	6/30/2019			6/30/2018			6/30/2019			6/30/2018
Balance at beginning of period	$	409		$	459		$	423		$	470
New loans purchased		-			-			-			-
Accretion to income		(12	)		(15	)		(24	)		(29	)
Disposals and other adjustments		-			-			-			-
Reclassification (to) from nonaccretable difference		(7	)		(1	)		(9	)		2
Balance at end of period	$	390		$	443		$	390		$	443

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 June 30, 2019 and December 31, 2018, the balance of the Bank’s investment was $3.4 million and $3.6 million, respectively, and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the qualified affordable housing project investment at June 30, 2019 and December 31, 2018 was $2.5 million and $2.9 million, respectively, and is reflected in other liabilities on the consolidated balance sheets. 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 month periods ended June 30, 2019 and 2018, the Bank recognized amortization expense of $87,000 and $82,000, respectively, which was included in income tax expense on the consolidated statements of income. Additionally, during the three month periods ended June 30, 2019 and 2018, the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of $123,000 and $98,000, respectively. During the six month periods ended June 30, 2019 and 2018, the Bank recognized amortization expense of $169,000 and $164,000, respectively, which was included in income tax expense on the consolidated statements of income. Additionally, during the six month periods ended June 30, 2019 and 2018, the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of $248,000 and $196,000, respectively.

- 30 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Supplemental Disclosure for Earnings Per Share

	Three Months Ended				Six Months Ended
	6/30/2019		6/30/2018		6/30/2019		6/30/2018
Basic	(Dollars in thousands, except for share and per share data)
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Net income attributable to First Capital, Inc. per common share, basic	$	0.86	$	0.63	$	1.50	$	1.27
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Add: Dilutive effect of restricted stock		11,976		7,041		11,110		6,401
Weighted average common shares outstanding, as adjusted		3,341,813		3,333,838		3,340,950		3,333,033
Net income attributable to First Capital, Inc. per common share, diluted	$	0.86	$	0.63	$	1.50	$	1.27

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 and six-month periods ended June 30, 2019 and 2018.

6. Stock-Based Compensation Plans

On May 20, 2009, the Company adopted the 2009 Equity Incentive Plan (the “2009 Plan”) which terminated as of May 20, 2019. The 2009 Plan provided 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 2009 Plan could not exceed 223,000 shares and 176,150 shares were still available for issuance under the 2009 Plan at its termination.

On May 22, 2019, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 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 2019 Plan may not exceed 176,150 shares. If an award under the 2009 Plan is canceled, terminates, expires, is forfeited or lapses for any reason, any issued shares subject to the award shall not be available for issuance pursuant to awards subsequently granted under the 2019 Plan. Further, no additional participants, as that term is defined in the 2009 Plan, are eligible for grants of awards under the 2009 Plan.

- 31 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(6 – continued)

At June 30, 2019, 176,150 shares of the Company’s common stock were available for issuance under the 2019 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 2019 Plan may be granted either alone, in addition to, or in tandem with, any other award granted under the 2019 Plan. The terms of the 2019 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 June 30, 2019, no stock options had been granted under the plans.

On February 19, 2019, the Company granted 9,750 restricted stock shares under the 2009 Plan to directors, officers and key employees at a grant-date price of $52.09 per share for a total of $508,000. The restricted stock vests ratably from the grant date through July 1, 2024, with 20% of the shares vesting each year on July 1 beginning July 1, 2020. On February 20, 2018, the Company granted 20,000 restricted stock shares under the 2009 Plan 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. 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 and six-month periods ended June 30, 2019 amounted to $62,000 and $118,000, respectively. Compensation expense related to restricted stock recognized for the three-month and six-month periods ended June 30, 2018 amounted to $57,000 and $106,000, respectively.

A summary of the Company’s nonvested restricted shares under the plans as of June 30, 2019 and changes during the six-month period then ended is presented below.

			Weighted
	Number		Average
	of		Grant Date
	Shares		Fair Value
Nonvested at January 1, 2019		24,900	$	34.10
Granted		9,750		52.09
Vested		-		-
Forfeited		-		-
Nonvested at June 30, 2019		34,650	$	39.16

- 32 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(6 – continued)

At June 30, 2019, there was $1.1 million of unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of 5.0 years.

7. Supplemental Disclosures of Cash Flow Information

	Six Months Ended
	June 30,
	2019		2018
	(In thousands)
Cash payments for:
Interest	$	926	$	731
Taxes (net of refunds received)		642		705
Noncash investing activities:
Transfers from loans to real estate acquired
through foreclosure		206		176

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. A quoted market price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
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 June 30, 2019 and December 31, 2018. The Company had no liabilities measured at fair value as of June 30, 2019 or December 31, 2018.

- 33 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
June 30, 2019
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	84,658	$	-	$	84,658
Agency CMO		-		40,226		-		40,226
Agency notes and bonds		-		64,459		-		64,459
Municipal obligations		-		70,102		-		70,102
Total securities available for sale	$	-	$	259,445	$	-	$	259,445
Equity securities	$	1,832	$	-	$	-		1,832
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	1,868	$	1,868
Land		-		-		192		192
Commercial real estate		-		-		850		850
Commercial business		-		-		400		400
Home equity and second mortgage		-		-		28		28
Other consumer		-		-		4		4
Total impaired loans	$	-	$	-	$	3,342	$	3,342
Loans held for sale	$	-	$	3,962	$	-	$	3,962
Foreclosed real estate:
Residential real estate	$	-	$	-	$	84	$	84
Commercial real estate		-		-		2,825		2,825
Total foreclosed real estate	$	-	$	-	$	2,909	$	2,909
December 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	91,257	$	-	$	91,257
Agency CMO		-		32,992		-		32,992
Agency notes and bonds		-		74,504		-		74,504
Municipal obligations		-		63,088		-		63,088
Total securities available for sale	$	-	$	261,841	$	-	$	261,841
Equity securities	$	1,715	$	-	$	-		1,715
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,181	$	2,181
Land		-		-		152		152
Construction		-		-		521		521
Commercial real estate		-		-		422		422
Commercial business		-		-		426		426
Home equity and second mortgage		-		-		35		35
Total impaired loans	$	-	$	-	$	3,737	$	3,737
Loans held for sale	$	-	$	2,849	$	-	$	2,849
Foreclosed real estate:
Residential real estate	$	-	$	-	$	33	$	33
Commercial real estate		-		-		3,109		3,109
Total foreclosed real estate	$	-	$	-	$	3,142	$	3,142

- 34 -

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 and Equity Securities. Securities classified as available for sale and equity securities 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. For securities where quoted market prices, market prices of similar securities or prices from an independent third party pricing service are not available, fair values are calculated using discounted cash flows or other market indicators and are classified within Level 3 of the fair value hierarchy. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect. Changes in fair value of equity securities are recorded in noninterest income on the consolidated statements of income.

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 June 30, 2019 and December 31, 2018, 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.

- 35 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8 – continued)

At June 30, 2019, 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 11% to 66%, with a weighted average discount of 38%. At December 31, 2018, 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 20% to 62%, with a weighted average discount of 39%. The Company recognized provisions for loan losses of $12,000 and $137,000 for the six months ended June 30, 2019 and 2018, respectively, for impaired loans. The Company recognized a reduction to the provision for loan losses of $8,000 for the three months ended June 30, 2019 and a provision of $72,000 for the three months ended June 30, 2018 for impaired loans.

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 June 30, 2019, 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 22% to 73%, with a weighted average of 24%. At December 31, 2018, the discount from appraised value ranged from 10% to 79%, with a weighted average of 51%. The Company recognized losses of $354,000 to write down foreclosed real estate for the six months ended June 30, 2019 and $217,000 to write down foreclosed real estate for the three months ended June 30, 2019. The Company recognized losses of $419,000 to write down foreclosed real estate for the three and six months ended June 30, 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 six month periods ended June 30, 2019 and 2018. There were no transfers into or out of the Company’s Level 3 financial assets for the six month periods ended June 30, 2019 and 2018. In addition, there were no transfers into or out of Levels 1 and 2 of the fair value hierarchy during the six month periods ended June 30, 2019 and 2018.

- 36 -

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
June 30, 2019
Financial assets:
Cash and cash equivalents	$	60,526	$	60,526	$	60,526	$	-	$	-
Interest-bearing time deposits		6,245		6,340		-		6,340		-
Securities available for sale		259,445		259,445		-		259,445		-
Loans held for sale		3,962		4,033		-		4,033		-
Loans, net		459,928		472,960		-		-		472,960
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,987		2,987		-		2,987		-
Equity securities (included in other assets)		1,832		1,832		1,832		-		-
Financial liabilities:
Deposits		734,627		733,775		-		-		733,775
Accrued interest payable		172		172		-		172		-
December 31, 2018:
Financial assets:
Cash and cash equivalents	$	41,112	$	41,112	$	41,112	$	-	$	-
Interest-bearing time deposits		7,710		7,650		-		7,650		-
Securities available for sale		261,841		261,841		-		261,841		-
Loans held for sale		2,849		2,900		-		2,900		-
Loans, net		434,260		427,200		-		-		427,200
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,828		2,828		-		2,828		-
Equity securities (included in other assets)		1,715		1,715		1,715		-		-
Financial liabilities:
Deposits		701,646		699,864		-		-		699,864
Accrued interest payable		150		150		-		150		-

- 37 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Revenue from Contracts with Customers

Substantially 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 and six months ended June 30, 2019 and 2018:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(In thousands)
Service charges on deposit accounts	$	516	$	545	$	977	$	1,054
ATM and debit card fees		729		643		1,376		1,243
Investment advisory income		146		130		244		218
Other		33		33		67		68
Revenue from contracts with customers		1,424		1,351		2,664		2,583
Net gains on loans and investments		246		194		438		435
Increase in cash value of life insurance		70		85		118		128
Other		28		106		53		116
Other noninterest income		344		385		609		679
Total noninterest income	$	1,768	$	1,736	$	3,273	$	3,262

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 stop payment charges and statement rendering, 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.

ATM and Debit Card Fees: The Company earns ATM usage fees and interchange fees from debit cardholder transactions conducted through a payment network. ATM fees are recognized at the point in time the transaction occurs. 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.

Investment Advisory Income: The Company earns trust, insurance commissions, brokerage commissions and annuities income from its contracts with 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 services and are generally assessed based on the market value of assets under management. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed. Other related fees, which are based on a fixed fee schedule, are recognized when the services are rendered.

- 38 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(9 – continued)

Other Income: Other income from contracts with customers includes safe deposit box fees and ACH origination fees. This revenue is recognized at the time the transaction is executed or over the period the Company satisfies the performance obligation.

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 February 2016, the FASB issued Accounting Standards Update (“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. The adoption of this update as of January 1, 2019 did not have a material impact on the Company’s consolidated financial position or results of operations. The Company also adopted all applicable practical expedients, including the option to not recognize lease assets and liabilities for short-term leases.

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. However, the magnitude of the adjustment is unknown. 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.

- 39 -

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(10 – continued)

In July 2019, the FASB voted to propose a delay in the effective date of ASU 2016-13 for smaller reporting companies (as defined by the SEC) and other non-SEC reporting entities. The proposal would delay the effective date to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is a smaller reporting company and would qualify for the delayed effective date if the proposal is approved by the FASB.

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. The adoption of this update effective January 1, 2019 did not have a material impact on the Company’s consolidated financial position or results of operations.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and adds certain disclosure requirements for fair value measurements. Among other changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements, but will be required to disclose the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. The amendments in the update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

11. Sale of Foreclosed Real Estate

Foreclosed real estate at June 30, 2019 includes one commercial property valued at $2.8 million. On June 6, 2019, the Company signed a Purchase Agreement to sell the property for $2.8 million, net of broker commissions and other costs, and wrote the property down to its net realizable value. The sale of the property was completed on July 19, 2019.

- 40 -

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, 2018 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 six months ended June 30, 2019, 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, 2018.

Financial Condition

Total assets increased $40.7 million from $794.2 million at December 31, 2018 to $834.9 million at June 30, 2019, an increase of 5.1%.

Net loans receivable (excluding loans held for sale) increased $25.6 million from $434.3 million at December 31, 2018 to $459.9 million at June 30, 2019. Construction loans, commercial business loans and commercial mortgage loans increased $7.4 million, $5.3 million and $4.4 million, respectively, during the six months ended June 30, 2019.

Securities available for sale decreased $2.4 million from $261.8 million at December 31, 2018 to $259.4 million at June 30, 2019. Purchases of $32.0 million of securities classified as available for sale were made during the six months ended June 30, 2019 and consisted primarily of municipal bonds, U.S. government agency notes and bonds and mortgage-backed CMO’s. Maturities and principal repayments of available for sale securities totaled $22.6 million and $11.8 million, respectively, during the six months ended June 30, 2019. Municipal bonds, U.S. government agency notes and bonds, mortgage-backed securities and CMO’s with a fair value of $5.4 million were sold during the six months ended June 30, 2019.

- 41 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

Cash and cash equivalents increased from $41.1 million at December 31, 2018 to $60.5 million at June 30, 2019, primarily due to excess liquidity from increases in deposit balances.

Total deposits increased from $701.6 million at December 31, 2018 to $734.6 million at June 30, 2019. Noninterest-bearing checking accounts, interest bearing checking accounts and savings accounts increased $15.3 million, $14.1 million and $5.6 million, respectively, during the six months ended June 30, 2019 primarily due to new accounts and normal balance fluctuations, while time deposits decreased $2.1 million during the period.

Total stockholders' equity attributable to the Company increased from $85.8 million at December 31, 2018 to $94.3 million at June 30, 2019, primarily due to a $4.9 million increase in the net unrealized gain on available for sale securities and a $3.4 million increase in retained net income during the six months ended June 30, 2019. The increase in the net unrealized gain 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 six-month periods ended June 30, 2019 and 2018. Net income attributable to the Company was $5.0 million ($1.50 per share) for the six months ended June 30, 2019 compared to $4.2 million ($1.27 per share) for the same time period in 2018. The increase is primarily due to an increase in net interest income after provision for loan losses partially offset by increases in noninterest expense and income tax expense.

Net income for the three-month periods ended June 30, 2019 and 2018. Net income attributable to the Company was $2.9 million ($0.86 per share) for the three months ended June 30, 2019 compared to $2.1 million ($0.63 per share) for the three months ended June 30, 2018. The increase in net income for 2019 is primarily due to an increase in net interest income after provision for loan losses partially offset by an increase in income tax expense.

Net interest income for the six-month periods ended June 30, 2019 and 2018. Net interest income increased $1.8 million for the six months ended June 30, 2019 compared to the same period in 2018 primarily due to increases in interest-earning assets and the interest rate spread.

Total interest income increased $2.1 million for the six months ended June 30, 2019 compared to the same period in 2018. For the six months ended June 30, 2019, the average balance of interest-earning assets and their tax-equivalent yield were $754.0 million and 4.27%, respectively. During the same period in 2018, the average balance of those assets was $719.8 million and the tax-equivalent yield was 3.90%.

Total interest expense increased $210,000 for the six months ended June 30, 2019 compared to the same period in 2018. The average balance of interest-bearing liabilities increased from $548.0 million for 2018 to $566.0 million for 2019. The average rate paid on interest-bearing liabilities increased from 0.27% to 0.33% 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 3.63% for the six months ended June 30, 2018 to 3.94% for the same period in 2019.

- 42 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

Net interest income for the three-month periods ended June 30, 2019 and 2018. Net interest income increased $1.1 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 primarily due to increases in interest-earning assets and the tax-equivalent yield on interest-earning assets.

Total interest income increased $1.2 million for the three months ended June 30, 2019 compared to the same period in 2018. For the three months ended June 30, 2019, the average balance of interest-earning assets and their tax-equivalent yield were $767.0 million and 4.35%, respectively. During the same period in 2018, the average balance of those assets was $728.6 million and the tax-equivalent yield was 3.93%. The changes in balances and yields are primarily due a change in asset mix as higher-yielding loans have grown and have replaced lower-yielding securities.

Total interest expense increased $96,000 for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. The average balance of interest-bearing liabilities increased from $555.2 million to $573.3 million when comparing the two periods and the average rate paid on those liabilities increased from 0.28% for the three months ended June 30, 2018 to 0.34% for the same period in 2019. As a result, the tax-equivalent interest rate spread increased from 3.65% for the three months ended June 30, 2018 to 4.01% for the three months ended June 30, 2019.

Provision for loan losses. Based on management’s analysis of the allowance for loan losses, the provision for loan losses increased from $513,000 for the six-month period ended June 30, 2018 to $750,000 for the same period in 2019 and decreased from $316,000 for the three months ended June 30, 2018 to $300,000 for the three months ended June 30, 2019. The increase in the provision for loan losses for the six months ended June 30, 2019 compared to the same period in 2018 is primarily due to loan growth, as the balance of loans increased $26.2 million for 2019 compared to an increase of $10.0 million for 2018. The Bank recognized net charge-offs of $206,000 for the six months ended June 30, 2019 compared to $280,000 during the same period in 2018.

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.

- 43 -

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 $4.6 million at June 30, 2019 and $4.1 million at December 31, 2018. 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 June 30, 2019, nonperforming loans totaled $2.6 million compared to $3.1 million at December 31, 2018. Included in nonperforming loans were loans 90 days or more past due and still accruing interest of $81,000 and $2,000 at June 30, 2019 and December 31, 2018, respectively. These loans were accruing interest because the estimated value of the collateral and collection efforts are deemed sufficient to ensure full recovery. At June 30, 2019 and December 31, 2018, nonaccrual loans totaled $2.5 million and $3.1 million, respectively.

Noninterest income for the six-month periods ended June 30, 2019 and 2018. Noninterest income for the six months ended June 30, 2019 increased $11,000 compared to the six months ended June 30, 2018. The increase was primarily due to increases in ATM and debit card fees and unrealized gains on equity securities of $133,000 and $117,000, respectively, partially offset by decreases of $112,000 and $77,000 in gains on the sale of loans and service charges on deposit accounts, respectively.

Noninterest income for the three-month periods ended June 30, 2019 and 2018. Noninterest income for the quarter ended June 30, 2019 increased $32,000 as compared to the quarter ended June 30, 2018. ATM and debit card fees increased $86,000 when comparing the two periods and losses on the sale of securities of $96,000 were recognized during the quarter ended June 30, 2018. This was partially offset by a $78,000 decrease in other income primarily related to a gain on bank-owned life insurance recognized in 2018.

Noninterest expense for the six-month periods ended June 30, 2019 and 2018. Noninterest expense for the six months ended June 30, 2019 increased $478,000 compared to the same period in 2018 due primarily to increases in compensation and benefit expense and data processing expense of $414,000 and $199,000, respectively, when comparing the two periods. This was partially offset by a $233,000 decrease in net losses on foreclosed real estate.

Noninterest expense for the three-month periods ended June 30, 2019 and 2018. Noninterest expense for the quarter ended June 30, 2019 increased $67,000 compared to the quarter ended June 30, 2018 primarily due to increases in compensation and benefit expense of $266,000 and data processing expense of $105,000, partially offset by a $307,000 decrease in net losses on foreclosed real estate when comparing the two periods.

Income tax expense. Income tax expense for the six-month period ended June 30, 2019 was $1.0 million, for an effective tax rate of 16.8%, compared to $648,000, for an effective tax rate of 13.3%, for the same period in 2018. For the three-month period ended June 30, 2019, income tax expense and the effective tax rate were $568,000 and 16.6%, respectively, compared to $287,000 and 12.0%, respectively, for the same period in 2018. The increase in the effective tax rate is primarily due an increase in taxable income and a reduction in benefits from a tax credit entity recognized in 2019.

- 44 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

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 June 30, 2019, the Bank had cash and cash equivalents of $60.5 million and securities available-for-sale with a fair value of $259.4 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.

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 Indiana Department of Financial Institutions (“IDFI”), cannot exceed net income for that year to date plus retained net income (as defined under Indiana law) for the preceding two calendar years. On a stand-alone basis, the Company had liquid assets of $2.9 million at June 30, 2019.

The Bank is required to maintain specific amounts of capital pursuant to regulatory requirements. As of June 30, 2019, 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 9.6%, 13.9%, 13.9% and 14.7%, 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 June 30, 2019, the Bank was considered “well-capitalized” under applicable regulatory guidelines.

- 45 -

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC.

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, 2018.

For the six months ended June 30, 2019, 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.

- 46 -

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.

- 47 -

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 June 30, 2019 and December 31, 2018 financial information:

	At June 30, 2019						At December 31, 2018
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	$	3,412			11.29	%	$	790		2.91	%
200bp		2,323			7.68			318		1.17
100bp		1,185			3.92			176		0.65
Static		-			-			-		-
(100)bp		(1,341	)		(4.44	)		876		3.23
(200)bp		(2,965	)		(9.81	)		139		0.51

At June 30, 2019, 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% or 2.00% would decrease the Company’s net interest income over a one year horizon compared to a flat interest rate scenario. At December 31, 2018, all scenarios described would have resulted in an increase of the Company’s net interest income over a one year horizon compared to a flat interest scenario. During the six months ended June 30, 2019, the Company updated the discount rates and betas used in the model for loans and deposits to better reflect the market, and also updated the deposit decay rates based on a third-party study of customer accounts.

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.

- 48 -

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 June 30, 2019 and December 31, 2018 financial information:

	At June 30, 2019
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	$	193,474	$	50,404			35.23	%		23.95	%		684	bp
200bp		179,333		36,263			25.35			21.92			481	bp
100bp		162,545		19,475			13.61			19.64			253	bp
Static		143,070		-			-			17.11			0	bp
(100)bp		120,797		(22,273	)		(15.57	)		14.30			(281	)bp
(200)bp		97,040		(46,030	)		(32.17	)		11.35			(576	)bp

	At December 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	$	106,468	$	3,885			3.79	%		14.67	%		142	bp
200bp		106,176		3,593			3.50			14.31			106	bp
100bp		104,978		2,395			2.33			13.85			60	bp
Static		102,583		-			-			13.25			0	bp
(100)bp		102,230		(353	)		(0.34	)		12.95			(30	)bp
(200)bp		93,763		(8,820	)		(8.60	)		11.63			(162	)bp

The previous tables indicate that at June 30, 2019 and December 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 or 200 basis point decrease in prevailing interest rates. As previously mentioned in this report, during the six months ended June 30, 2019, the Company updated the discount rates and betas used in the model for loans and deposits to better reflect the market, and also updated the deposit decay rates based on a third-party study of customer accounts.

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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 June 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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, 2018.

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

Issuer Purchases of Equity Securities

On August 19, 2008, the board of directors authorized the repurchase of up to 240,467 shares of the Company’s outstanding common stock. The stock repurchase program will expire upon the purchase of the maximum number of shares authorized under the program, unless the board of directors terminates the program earlier. There were 34 shares purchased under the stock repurchase program at a price of $47.67 per share during the quarter ended June 30, 2019. The maximum number of shares that may yet be purchased under the plan is 142,178.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 20, 2009, the Company adopted the First Capital, Inc. 2009 Equity Incentive Plan (the “2009 Plan”) which terminated as of May 20, 2019. On May 22, 2019, the Company adopted the First Capital, Inc. 2019 Equity Incentive Plan (the “2019 Plan”). Similar to the 2009 Plan, the 2019 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 2019 Plan may not exceed 176,150 shares. The foregoing description of the 2019 Plan is not purported to be complete and is qualified by reference to the complete First Capital, Inc. 2019 Equity Incentive Plan, which is attached hereto as Exhibit 10.1.

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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)
10.1	First Capital, Inc. 2019 Equity Incentive Plan
11	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	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, 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.

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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 August 9, 2019	BY:	/s/William W. Harrod
		William W. Harrod
		President and CEO
Dated August 9, 2019	BY:	/s/ Michael C. Frederick
		Michael C. Frederick
		Executive Vice President, CFO
		and Treasurer

EX-10.1

EXHIBIT 10.1

FIRST CAPITAL, INC. 2019 EQUITY INCENTIVE PLAN

FIRST CAPITAL, INC.

2019 EQUITY INCENTIVE PLAN

ARTICLE 1

PURPOSE

The purpose of the First Capital, Inc. 2019 Equity Incentive Plan (the “Plan”) is to promote the success, and enhance the value, of First Capital, Inc. (the “Company”), by linking the personal financial and economic interests of employees, officers and directors of the Company or any Affiliate (as defined below) to those of Company shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of employees, officers and directors upon whose judgment, interest and special effort the successful conduct of the Company’s operation largely depends. Accordingly, the Plan permits the grant of equity incentive awards from time to time to selected employees, officers and directors of the Company and its Affiliates.

ARTICLE 2

DEFINITIONS

When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Article 2 unless the context clearly requires a different meaning. The following words and phrases shall have the following meanings:

1933 Act means the Securities Act of 1933, as amended from time to time.

1934 Act means the Securities Exchange Act of 1934, as amended from time to time.

Affiliate means an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee.

Award means any Option, Restricted Stock Award, Performance Award or SAR granted to a Participant under the Plan.

Award Agreement means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award.

Board of Directors means the Board of Directors of the Company.

Cause means (1) any act of (A) fraud or intentional misrepresentation, or (B) embezzlement, misappropriation or conversion of assets or opportunities of the Company or Subsidiary, or (2) willful violation of any law, rule or regulation in connection with the performance of a Participant’s duties (other than traffic violations or similar offenses), or (3) with respect to any employee of the Company or Subsidiary, commission of any act of moral turpitude or conviction of a felony, or (4) the willful or negligent failure of the Participant to perform his or her duties in any material respect; provided, however, that if the Participant is subject to an employment agreement (or other similar agreement) with the Company or a Subsidiary that provides a definition of termination for “cause,” then, for purposes of the Plan, Cause shall have the meaning set forth in such agreement.

Change in Control means the occurrence of any one of the following events:

(1) Merger or Consolidation: The Company merges into or consolidates with another corporation, or merges another corporation into the Company, and, as a result, less than fifty percent (50%) of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were shareholders of the Company immediately before the merger or consolidation;

(2) Acquisition of Significant Share Ownership: A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Section 13(d) or 14(d) of the 1934 Act, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act), directly or indirectly, of twenty-five percent (25%) or more of a class of the Company’s voting securities; provided, however, that this clause (2) shall not apply to beneficial ownership of Company voting shares held by a trustee or other fiduciary holding securities under an employee benefit plan of the Company or by an entity of which the Company, directly or indirectly, beneficially owns fifty percent (50%) or more of its outstanding voting securities;

(3) Change in Board Composition: During any period of two consecutive years, individuals who constitute the Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that for purposes of this clause (3), each director who is first elected by the Board of Directors (or first nominated by the Board of Directors for election by the shareholders) by a vote of at least two-thirds (⅔) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or

(4) Sale of Assets: The Company or First Harrison Bank sells to a third party all or substantially all of its assets, or consummation of an agreement for the sale or disposition by the Company of all or substantially all of the Company or First Harrison Bank’s assets.

Notwithstanding the foregoing, in no event shall a Change in Control be deemed to have occurred with respect to a Participant if the Participant is part of a purchasing group that consummates the Change in Control transaction. A Participant shall be deemed part of a purchasing group for purposes of the preceding sentence if the Participant is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company, or (ii) ownership of equity of participation in the purchasing company or group that is otherwise insignificant, as determined prior to the Change in Control by a majority of the continuing Non-Employee Directors).

Change in Control Price means the highest price per share of Shares offered in conjunction with any transaction resulting in a Change in Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change in Control occurring solely by reason of a change in the composition of the Board of Directors, the highest Fair Market Value of the Shares on any of the thirty (30) trading days immediately preceding the date on which a Change in Control occurs.

Code means the Internal Revenue Code of 1986, as amended from time to time, and the rules, regulations, and guidance published thereunder.

Committee means the committee of the Board of Directors described in Article 4 of the Plan.

Company means First Capital, Inc., or any successor corporation.

Continuous Status as a Participant means the absence of any interruption or termination of service as an employee, officer or director of the Company or any Affiliate, as applicable. Continuous service shall not be considered interrupted in the case of sick leave, military leave or any other absence approved by the Company or an Affiliate, in the case of transfers between payroll locations or between the Company, an Affiliate or a successor, or performance of services in an emeritus, advisory or consulting capacity, provided, however, that for purposes of an Incentive Stock Option, “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee of the Company or any Affiliate, as applicable.

Covered Employee means a covered employee as defined in Section 162(m)(3) of the Code.

Disability shall mean any illness or other physical or mental condition of a Participant that renders the Participant incapable of performing his or her customary and usual duties for the Company or an Affiliate, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in the judgment of the Committee, is permanent and continuous in nature. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean Permanent and Total Disability as defined in Section 22(c)(3) of the Code.

Effective Date has the meaning assigned such term in Section 3.1 of the Plan.

Eligible Participant means an employee, officer or director of the Company or any Affiliate.

Exchange means any national securities exchange on which the Stock may from time to time be listed or traded.

Fair Market Value on any date, means (i) if the Stock is listed on an Exchange, the closing sales price on such exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on a securities exchange, Fair Market Value shall mean a price determined by the Committee in good faith on the basis of objective criteria.

Grant Date means the date an Award is made by the Committee.

Incentive Stock Option means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto.

Non-Employee Director means a director of the Company or an Affiliate who is not a common law employee of the Company or an Affiliate and is a “non-employee director” within the meaning of Rule 16b-3 under the 1934 Act.

Nonstatutory Stock Option means an Option that is not an Incentive Stock Option.

Option means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

Parent or Subsidiary means a “parent” or “subsidiary” as such terms are defined in Sections 424(e) and (f) of the Code.

Participant means a person who, as an employee, officer or director of the Company or any Affiliate, has been granted and currently holds an Award under the Plan; provided, however, that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Article 9.4 of the Plan or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.

Performance Award means an award of performance shares as described in Section 8.7 of the Plan.

Plan means the First Capital, Inc. 2019 Equity Incentive Plan, as amended from time to time.

Prior Plan means the First Capital Inc. 2009 Equity Incentive Plan, as amended.

Restricted Stock Award means Stock granted to a Participant under Article 8 of the Plan that is subject to certain restrictions and to risk of forfeiture.

Shares means shares of Stock. If there has been an adjustment or substitution pursuant to Article 10 of the Plan, the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Article 10 of the Plan.

Stock means the common stock of the Company, par value $0.01, and such other securities of the Company as may be substituted for Stock pursuant to Article 10 of the Plan.

Stock Appreciation Right or SAR means a right granted to a Participant under Article 8 to receive a stock or cash payment, as determined by the Committee in an Award Agreement, equal to the difference between the Fair Market Value of a share of Stock as of the date of exercise of the SAR over the grant price of the SAR, as determined pursuant to Article 8.

ARTICLE 3

EFFECTIVE TERM OF PLAN

3.1       EFFECTIVE DATE. The Plan shall be effective as of the date it is approved by the shareholders of the Company (the “Effective Date”).

3.2       TERMINATION OF PLAN. The Plan shall terminate on the tenth anniversary of the Effective Date. The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination.

ARTICLE 4

ADMINISTRATION

4.1       COMMITTEE. The Plan shall be administered by the Committee appointed by the Board of Directors (which Committee shall consist of at least two disinterested directors) or, at the discretion of the Board of Directors from time to time, the Plan may be administered by the Board of Directors. It is intended that at least two of the directors appointed to serve on the Committee shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and “independent directors” (within the meaning of the U.S. Market Rules of the Nasdaq Stock Market), and that any such members of the Committee who do not so qualify shall abstain from participating in any decision to make or administer Awards that are made to Eligible Participants who, at the time of consideration for such Award, (i) are persons subject to the short-swing profit rules of Section 16 of the 1934 Act, or (ii) are reasonably anticipated to become Covered Employees during the term of the Award. However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements or shall fail to abstain from such action shall not invalidate any Award made by the Committee, which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board of Directors. The Board of Directors may reserve for itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board of Directors has reserved any authority and responsibility or during any time that the Board of Directors is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board of Directors. To the extent any action of the Board of Directors under the Plan conflicts with actions taken by the Committee, the actions of the Board of Directors shall control.

4.2       ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Each member of the Committee is entitled, in good faith, to rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s or an Affiliate’s independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

4.3       AUTHORITY OF COMMITTEE. Except as provided below, the Committee has the exclusive power, authority and discretion to:

(a)	Grant Awards;
(b)	Designate Participants;
(c)	Determine the type or types of Awards to be granted to each Participant;
(d)	Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

(e) Determine the terms and conditions of any Award granted under the Plan, including, but not limited to, the exercise price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines;

(f) Accelerate the vesting, exercisability or lapse of restrictions of any outstanding Award in accordance with Articles 9 and 10 of the Plan, based in each case on such considerations as the Committee in its sole discretion determines;

(g)	Prescribe the form of each Award Agreement, which need not be identical for each Participant;
(h)	Decide all other matters that must be determined in connection with an Award;

(i) Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan;

(j)	Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; and
(k)	Amend the Plan or any Award Agreement as provided herein.

Any interpretation of the Plan by the Committee and any decisions made by it under the Plan shall be final and binding on all persons. No such decisions will be subject to de novo review if challenged in court. In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and bylaws of the Company and applicable law.

Notwithstanding the above, the Board of Directors or the Committee may also delegate, to the extent permitted by applicable law, to one or more officers of the Company, the Committee’s authority under subsections (a) through (h) above, pursuant to a resolution that specifies the total number of Awards that may be granted under the delegation, provided that no officer may be delegated the power to designate himself or herself as a recipient of such Awards; and provided further that no delegation of its duties and responsibilities may be made to officers of the Company with respect to Awards to Eligible Participants who as of the Grant Date are persons subject to the short-swing profit rules of Section 16 of the 1934 Act, or who as of the Grant Date are reasonably anticipated to become Covered Employees during the term of the Award. The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report to the Committee regarding the delegated duties and responsibilities.

4.4       AWARD AGREEMENTS. Each Award shall be evidenced by an Award Agreement. Each Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

4.5       INDEMNIFICATION. To the extent allowable under applicable law, each member of the Committee shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which such member may be a party or in which he or she may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by such member in satisfaction of judgment in such action, suit, or proceeding against him or her provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify or hold them harmless.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

5.1       NUMBER OF SHARES. Subject to adjustment as provided in Article 10 of the Plan, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 176,150 (all of which may be issued pursuant to the exercise of Incentive Stock Options, to the extent such Awards are granted under the Plan). As of the Effective Date, no further awards shall be granted pursuant to the Prior Plan. During the terms of the Awards, the Company shall keep available at all times the number of Shares required to satisfy such Awards.

5.2       SHARE COUNTING. If an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued Shares subject to the Award shall not be available for issuance pursuant to Awards subsequently granted under the Plan. To the extent that an award granted under the Prior Plan is canceled, terminates, expires, is forfeited or lapses for any reason under the terms of the Prior Plan, any unissued Shares underlying such award shall not be made available for grant of Awards under this Plan. Notwithstanding anything to the contrary contained in the Plan, Shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such Shares are (a) Shares tendered in payment of an Option, (b) Shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (c) Shares covered by a stock-settled SAR or other Awards that were not issued upon the settlement of the Award.

5.3       STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

5.4       DELIVERY OF SHARES. Delivery of Shares or other amounts under the Plan shall be subject to the following:

(a)       Compliance with Applicable Law. Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under the Plan unless such delivery or distribution complies with applicable law (including requirements of the 1933 Act), and the applicable requirements of any Exchange.

(b)       Certificates. To the extent that the Plan provides for the issuance of Shares, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any Exchange.

ARTICLE 6

ELIGIBILITY

Awards may be granted only to Eligible Participants; except that Incentive Stock Options may be granted only to Eligible Participants who are employees of the Company or a Parent or Subsidiary of the Company.

ARTICLE 7

STOCK OPTIONS

7.1       GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:

(a) Exercise Price. The exercise price of an Option shall not be less than the Fair Market Value as of the Grant Date.

(b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(d) of the Plan. The Committee shall also determine the conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. The Committee may waive any exercise or vesting provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable or vested at an earlier date.

(c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, Shares, or other property (including “cashless exercise” arrangements), and the methods by which Shares shall be delivered or deemed to be delivered to Participants.

(d) Exercise Term. In no event may any Option be exercisable for more than ten (10) years from the Grant Date.

7.2       INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:

(a) Lapse of Option. Subject to any earlier termination provision contained in the Award Agreement, an Incentive Stock Option shall lapse upon the earliest of the following circumstances; provided, however, that the Committee may, prior to the lapse of an Incentive Stock Option under the circumstances described in subsections (3), (4) or (5) below, provide in writing that the Option will extend until a later date, but if an Incentive Stock Option is so extended and is exercised after the dates specified in subsections (3) and (4) below, it will automatically become a Nonstatutory Stock Option:

(1)	The expiration date set forth in the Award Agreement.
(2)	The tenth anniversary of the Grant Date.

(3) Three (3) months after termination of the Participant’s Continuous Status as a Participant for any reason other than the Participant’s Disability or death.

(4) One (1) year after the Participant’s Continuous Status as a Participant by reason of the Participant’s Disability.

(5) One (1) year after the termination of the Participant’s death if the Participant dies while employed, or during the three-month period described in paragraph (3) or during the one-year period described in paragraph (4), but before the Incentive Stock Option otherwise lapses.

Unless the exercisability of an Incentive Stock Option is accelerated as provided in Articles 9 or 10 of the Plan, if a Participant exercises an Incentive Stock Option after termination of employment, the Incentive Stock Option may be exercised only with respect to the Shares that were otherwise vested on the Participant’s termination of employment. Upon the Participant’s death, any exercisable Incentive Stock Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 9.4 of the Plan.

(b) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the Grant Date) of all Shares with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00 (or any higher value as may be permitted under Section 422 of the Code). To the extent the aggregate Fair Market Value exceeds such limit, the Options or portions thereof exceeding the limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.

(c) Ten Percent Owners. No Incentive Stock Option shall be granted to any individual who, at the Grant Date, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary unless the exercise price per share of such Option is at least one hundred and ten percent (110%) of the Fair Market Value per Share at the Grant Date and the Option expires no later than five (5) years after the Grant Date.

(d) Expiration of Authority to Grant Incentive Stock Options. No Incentive Stock Option may be granted pursuant to the Plan after the day immediately prior to the tenth anniversary of the date the Plan was approved by shareholders, or the termination of the Plan, if earlier.

(e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or legal representative.

(f) Eligible Grantees. The Committee may not grant an Incentive Stock Option to a person who is not at the Grant Date an employee of the Company or of an Affiliate.

ARTICLE 8

RESTRICTED STOCK/PERFORMANCE AWARDS/SARS

8.1       GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee.

8.2       ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Agreement, the Participant shall have all of the rights of a shareholder with respect to the Restricted Stock.

8.3       FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of Continuous Status as a Participant during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from death or disability or in connection with a Change in Control, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

8.4       DELIVERY OF RESTRICTED STOCK. Unless otherwise held in a trust and registered in the name of the trustee, reasonably promptly after the Grant Date with respect to shares of Restricted Stock, the Company shall cause to be issued a stock certificate, registered in the name of the Participant to whom the Restricted Stock was granted, evidencing such shares. Each such stock certificate shall bear the following legend:

“The transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms and conditions (including forfeiture provisions and restrictions against transfer) contained in the First Capital, Inc. 2019 Equity Incentive Plan and in the Award Agreement entered into between the registered owner of such shares and First Capital, Inc. or its Affiliates. A copy of the Plan and the Award Agreement is on file in the office of the Corporate Secretary of First Capital, Inc.”

Such legend shall not be removed until the Participant vests in such shares pursuant to the terms of the Plan and the Award Agreement. Each certificate issued pursuant to this Section 8.4, in connection with a Restricted Stock Award, shall be held by the Company or its Affiliates, unless the Committee determines otherwise.

8.5       VOTING RIGHTS. Unless otherwise determined by the Committee at the time of grant, a Participant holding Restricted Stock shall be entitled to exercise full voting rights with respect to those Shares during the restriction period.

8.6       DIVIDENDS AND OTHER DISTRIBUTIONS. During the restriction period, a Participant holding Restricted Stock may, if the Committee so determines, be credited with dividends paid with respect to the underlying Shares. Such dividends shall be paid to the Participant at times determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends that the Committee deems appropriate.

8.7       PERFORMANCE AWARDS. Subject to the limitations of this Plan, the Committee may, in its discretion, grant Performance Awards to eligible individuals upon such terms and conditions and at such times as the Committee shall determine. Performance Awards may be in the form of performance shares. An award of a performance share is a grant of a right to receive shares of Stock which is contingent upon the achievement of performance or other objectives during a specified period and which has a value on the date of grant equal to the Fair Market Value of a share of Stock.

Subject to the terms of this Plan and the requirements of Section 409A of the Code, the Committee has the authority to determine the nature, length and starting date of the period during which a Participant may earn a Performance Award and will determine the conditions that must be met in order for a Performance Award to be granted or to vest or be earned. These conditions may include specific performance objectives, continued service or employment for a certain period of time, or a combination of such conditions. Performance awards granted under the Plan may be based on one or more of the following business criteria: basic earnings per common share, basic cash earnings per common share, diluted earnings per common share, diluted cash earnings per common share, net income, cash earnings, net interest income, non-interest income, general and administrative expense to average assets ratio, cash general and administrative expense to average assets ratio, efficiency ratio, cash efficiency ratio, return on average assets, cash return on average assets, return on average shareholders’ equity, cash return on average shareholders’ equity, return on average tangible shareholders’ equity, cash return on average tangible shareholders’ equity, core earnings, operating income, operating efficiency ratio, net interest rate spread, loan production volume, non-performing loans, cash flow, strategic business objectives, consisting of one or more objectives based upon meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or goals relating to capital raising and capital management, or any combination of the foregoing. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, past performance of the Company or any subsidiary, operating unit or division of the Company and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares of common stock outstanding, or to assets or net assets.

No later than 90 days (or such other time as determined by the Committee with respect to an Award) following the commencement of a performance period, the Committee shall, in writing (i) select the performance goal or goals applicable to the performance period, (ii) establish the various targets and bonus amounts which may be earned for such performance period, and (iii) specify the relationship between the performance goals and targets and the amounts to be earned by each participant for the performance period.

8.8       GRANT OF SARS. The Committee is authorized to grant SARs to Participants on the following terms and conditions:

(a) Right to Payment. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive the excess, if any, of:

(1) The Fair Market Value of a share of Stock on the date of exercise; over

(2) The grant price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of a share of Stock on the date of grant in the case of any SAR related to any Incentive Stock Option

(b) Other Terms. All such Awards shall be evidenced by an Award Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Agreement.

ARTICLE 9

GENERAL PROVISIONS APPLICABLE TO AWARDS

9.1       STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in the sole discretion of the Committee, be granted either alone or in addition to or, in tandem with, any other Award granted under the Plan.

9.2       TERM OF AWARD. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option exceed a period of ten (10) years from its Grant Date (or, if Section 7.2(c) applies, five (5) years from its Grant Date).

9.3       LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if that Code section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be an option described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards.

9.4       BENEFICIARIES. Notwithstanding Section 9.3 of the Plan, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and the Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

9.5       STOCK CERTIFICATES. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.

9.6       ACCELERATION UPON DEATH OR DISABILITY. Except as otherwise provided in the Award Agreement, upon the Participant’s death or Disability during his or her Continuous Status as a Participant, all of such Participant’s outstanding Options and other Awards in the nature of rights that may be exercised shall become fully exercisable and all time-based vesting restrictions on the Participant’s outstanding Awards shall lapse. Any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(b) of the Plan, the excess Options shall be deemed to be Nonstatutory Stock Options.

9.7       TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion and in accordance with the terms of the Plan, and any determination by the Committee shall be final and conclusive. A Participant’s Continuous Status as a Participant shall not be deemed to terminate in a circumstance in which a Participant transfers from the Company to an Affiliate, transfers from an Affiliate to the Company, or transfers from one Affiliate to another Affiliate. To the extent that this provision causes Incentive Stock Options to extend beyond three months from the date a Participant is deemed to be an employee of the Company, a Parent or Subsidiary for purposes of Sections 424(e) and 424(f) of the Code, the Options held by such Participant shall be deemed to be Nonstatutory Stock Options.

ARTICLE 10

CHANGE IN CAPITAL STRUCTURE; CHANGE IN CONTROL

10.1       CHANGES IN CAPITAL STRUCTURE. In the event of a corporate event or transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the authorization limits under Article 5 shall be adjusted proportionately, and the Committee shall adjust the Plan and Awards to preserve the benefits or potential benefits of the Awards. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Without limiting the foregoing, in the event of a subdivision of the outstanding stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding stock unto a lesser number of Shares, the authorization limits under Article 5 shall automatically be adjusted proportionately, and the Shares then subject to each Award shall automatically be adjusted proportionately without any change in the aggregate purchase price therefor.

10.2       CHANGE IN CONTROL. Subject to the provisions of Section 10.3 of the Plan or as otherwise provided in the Plan or the Award Agreement, in the event of a Change in Control, unless otherwise specifically prohibited under law or by the rules and regulations of an Exchange:

(a) Any and all Options granted hereunder shall become immediately exercisable; additionally, if a Participant’s employment or service is involuntarily terminated or constructively terminated for any reason except Cause within twelve (12) months of such Change in Control, the Participant shall have until the expiration of the term of the Option to exercise such Options;

(b) Any time-based and other restrictions imposed on Restricted Stock shall lapse; and

(c) The Committee shall have the ability to unilaterally determine that all outstanding Awards are cancelled upon a Change in Control, and the value of such Awards, as determined by the Committee in accordance with the terms of the Plan and the Award Agreement, be paid out in cash in an amount based on the Change in Control Price within a reasonable time subsequent to the Change in Control.

10.3       ALTERNATIVE AWARDS. Notwithstanding Section 10.2 of the Plan, no cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith prior to the occurrence of a Change in Control that such Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted Award hereinafter called an “Alternative Award”) by any successor as described in Section 12.16 of the Plan; provided, however, that any such Alternative Award must:

(a) Be based on stock which is traded on an established U.S. securities market, or that the Committee reasonably believes will be so traded within sixty (60) days after the Change in Control;

(b) Provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award;

(c) Have substantially equivalent economic value to such Award (determined at the time of the Change in Control); and

(d) Have terms and conditions which provide that, in the event the Participant’s employment is involuntarily terminated or constructively terminated, any conditions on a Participant’s rights under, or any restrictions on transfer or exercisability applicable to, each such Alternative Award shall be waived or shall lapse, as the case may be.

ARTICLE 11

AMENDMENT, MODIFICATION AND TERMINATION

11.1       AMENDMENT, MODIFICATION AND TERMINATION. The Board of Directors may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board of Directors, either (i) materially increase the number of Shares available under the Plan, (ii) expand the types of awards under the Plan, (iii) materially expand the class of participants eligible to participate in the Plan, (iv) materially extend the term of the Plan, or (v) otherwise constitute a material change requiring shareholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of an Exchange, then such amendment shall be subject to shareholder approval; and provided, further, that the Board of Directors may condition any other amendment or modification on the approval of shareholders of the Company for any reason, including by reason of such approval being necessary or deemed advisable to (i) permit Awards made hereunder to be exempt from liability under Section 16(b) of the 1934 Act, (ii) comply with the listing or other requirements of an Exchange, or (iii) satisfy any other tax, securities or other applicable laws, policies or regulations.

11.2       AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however:

(a) Subject to the terms of the applicable Award Agreement, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, or otherwise settled on the date of such amendment or termination (with the per-share value of an Option for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise price of such Award);

(b) The original term of an Option may not be extended without the prior approval of the shareholders of the Company;

(c) Except as otherwise provided in Article 10 of the Plan, the exercise price of an Option may not be reduced, directly or indirectly, without the prior approval of the shareholders of the Company; and

(d) No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be “adversely affected” by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, or otherwise settled on the date of such amendment (with the per-share value of an Option for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award).

ARTICLE 12

GENERAL PROVISIONS

12.1       NO RIGHTS TO AWARDS; NON-UNIFORM DETERMINATIONS. No Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or Eligible Participants uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or not such Eligible Participants are similarly situated).

12.2       NO SHAREHOLDER RIGHTS. Except as otherwise provided in this Plan or in an Award Agreement, no Award gives a Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

12.3       WITHHOLDING. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan. If Shares are surrendered to the Company to satisfy withholding obligations in excess of the minimum withholding obligation, such Shares must have been held by the Participant as fully vested shares for such period of time, if any, as necessary to avoid variable accounting for the Option. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award, Shares having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.

12.4       NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan, in any Award Agreement or in any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, director or consultant at any time, nor confer upon any Participant any right to continue as an employee, officer, director or consultant of the Company or any Affiliate, whether for the duration of a Participant’s Award or otherwise.

12.5       UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

12.6       CODE SECTION 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of Continuous Service as a Participant shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.

12.7       RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan.

12.8       EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Affiliates.

12.9       TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

12.10       GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

12.11       FRACTIONAL SHARES. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.

12.12       GOVERNMENT AND OTHER REGULATIONS.

(a) Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.

(b) Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.

12.13       GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Agreements shall be construed in accordance with and governed by the laws of Indiana.

12.14       ADDITIONAL PROVISIONS. Each Award Agreement may contain such other terms and conditions as the Committee may determine; provided, however, that such other terms and conditions are not inconsistent with the provisions of the Plan.

12.15       NO LIMITATIONS ON RIGHTS OF COMPANY. Subject to Section 12.16 of the Plan, the grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume Awards, other than under the Plan, to or with respect to any person. If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.

12.16       SUCCESSORS. Any obligations of the Company or an Affiliate under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company or Affiliate, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company or Affiliate, as applicable.

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: August 9, 2019	/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: August 9, 2019	/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 June 30, 2019, 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: August 9, 2019	BY:	/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 June 30, 2019, 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: August 9, 2019	BY:	/s/ Michael C. Frederick
		Michael C. Frederick
		Executive Vice President, Chief
		Financial Officer and Treasurer
		(Principal Financial and Accounting
		Officer)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 26, 2019
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 Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		3,363,632
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 21,825	$ 17,394
Interest bearing deposits with banks	3,730	1,717
Federal funds sold	34,971	22,001
Total cash and cash equivalents	60,526	41,112
Interest-bearing time deposits	6,245	7,710
Securities available for sale, at fair value	259,445	261,841
Loans, net	459,928	434,260
Loans held for sale	3,962	2,849
Federal Home Loan Bank and other stock, at cost	1,988	1,988
Foreclosed real estate	2,909	3,142
Premises and equipment	14,546	14,364
Accrued interest receivable	2,987	2,828
Cash value of life insurance	8,177	8,059
Goodwill	6,472	6,472
Core deposit intangible	892	966
Other assets	6,841	8,571
Total Assets	834,918	794,162
LIABILITIES
Noninterest-bearing	158,591	143,249
Interest-bearing	576,036	558,397
Total deposits	734,627	701,646
Accrued interest payable	172	150
Accrued expenses and other liabilities	5,689	6,410
Total liabilities	740,488	708,206
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 3,791,283 shares (3,781,533 in 2018); outstanding 3,364,460 shares (3,354,744 in 2018)	38	38
Additional paid-in capital	40,723	40,215
Retained earnings-substantially restricted	61,563	58,137
Unearned stock compensation	(1,110)	(720)
Accumulated other comprehensive income (loss)	1,462	(3,477)
Less treasury stock, at cost - 426,823 shares (426,789 in 2018)	(8,351)	(8,349)
Total First Capital, Inc. stockholders' equity	94,325	85,844
Noncontrolling interest in subsidiary	105	112
Total equity	94,430	85,956
Total Liabilities and Equity	$ 834,918	$ 794,162

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	7,500,000	7,500,000
Common stock, shares issued (in shares)	3,791,283	3,781,533
Common stock, shares outstanding (in shares)	3,364,460	3,354,744
Treasury stock, shares (in shares)	426,823	426,789

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
INTEREST INCOME
Loans, including fees	$ 6,555	$ 5,558	$ 12,612	$ 10,859
Securities:
Taxable	964	945	1,948	1,897
Tax-exempt	421	361	812	739
Dividends	30	21	56	54
Other interest income	249	178	449	278
Total interest income	8,219	7,063	15,877	13,827
INTEREST EXPENSE
Deposits	491	395	947	716
Advances from Federal Home Loan Bank				21
Total interest expense	491	395	947	737
Net interest income	7,728	6,668	14,930	13,090
Provision for loan losses	300	316	750	513
Net interest income after provision for loan losses	7,428	6,352	14,180	12,577
NONINTEREST INCOME
Noninterest income	1,424	1,351	2,664	2,583
Loss on sale of securities available for sale and time deposits		(96)	(97)	(95)
Unrealized gain (loss) on equity securities	(14)		117
Gain on sale of loans	260	290	418	530
Increase in cash surrender value of life insurance	70	85	118	128
Other income	61	139	120	184
Total noninterest income	1,768	1,736	3,273	3,262
NONINTEREST EXPENSE
Compensation and benefits	3,208	2,942	6,250	5,836
Occupancy and equipment	395	414	792	827
Data processing	869	764	1,707	1,508
Professional fees	177	181	406	359
Advertising	159	103	248	188
Net loss on foreclosed real estate	93	400	288	521
Other expenses	863	893	1,738	1,712
Total noninterest expense	5,764	5,697	11,429	10,951
Income before income taxes	3,432	2,391	6,024	4,888
Income tax expense	568	287	1,010	648
Net Income	2,864	2,104	5,014	4,240
Less: net income attributable to noncontrolling interest in subsidiary	4	4	7	7
Net Income Attributable to First Capital, Inc.	$ 2,860	$ 2,100	$ 5,007	$ 4,233
Earnings per common share attributable to First Capital, Inc.:
Basic (in dollars per share)	$ 0.86	$ 0.63	$ 1.50	$ 1.27
Diluted (in dollars per share)	0.86	0.63	1.50	1.27
Dividends per share (in dollars per share)	$ 0.24	$ 0.23	$ 0.47	$ 0.46
Deposit Account [Member]
NONINTEREST INCOME
Noninterest income	$ 516	$ 545	$ 977	$ 1,054
ATM and Debit Card Fees [Member]
NONINTEREST INCOME
Noninterest income	729	643	1,376	1,243
Investment Advisory, Management and Administrative Service [Member]
NONINTEREST INCOME
Noninterest income	$ 146	$ 130	$ 244	$ 218

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Income	$ 2,864	$ 2,104	$ 5,014	$ 4,240
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period	4,126	(636)	6,473	(4,651)
Income tax (expense) benefit	1,026	(158)	1,610	(1,157)
Net of tax amount	3,100	(478)	4,863	(3,494)
Less:reclassification adjustment for realized losses included in net income		96	97	95
Income tax benefit		(23)	(21)	(23)
Net of tax amount		73	76	72
Other Comprehensive Income (Loss), net of tax	3,100	(405)	4,939	(3,422)
Comprehensive Income	5,964	1,699	9,953	818
Less:comprehensive income attributable to the noncontrolling interest in subsidiary	4	4	7	7
Comprehensive Income Attributable to First Capital, Inc.	$ 5,960	$ 1,695	$ 9,946	$ 811

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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, 2017	$ 38	$ 39,515	$ 51,972	$ (2,060)	$ (212)	$ (8,315)	$ 112	$ 81,050
Net Income			4,233				7	4,240
Other comprehensive loss				(3,422)				(3,422)
Cash dividends
Cash dividends			(1,544)					(1,558)
Cash dividends							(14)
Restricted stock grants		748			(748)
Stock compensation expense					106			106
Balances at Jun. 30, 2018	38	40,263	54,661	(5,482)	(854)	(8,315)	105	80,416
Balances at Dec. 31, 2018	38	40,215	58,137	(3,477)	(720)	(8,349)	112	85,956
Net Income			5,007				7	5,014
Other comprehensive loss				4,939				4,939
Cash dividends
Cash dividends			(1,581)					(1,595)
Cash dividends							(14)
Restricted stock grants		508			(508)
Stock compensation expense					118			118
Purchase of 34 treasury shares						(2)		(2)
Balances at Jun. 30, 2019	$ 38	$ 40,723	$ 61,563	$ 1,462	$ (1,110)	$ (8,351)	$ 105	$ 94,430

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals)	6 Months Ended
	Jun. 30, 2019 shares
Purchase of treasury shares (in shares)	34

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 5,014	$ 4,240
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	804	850
Depreciation and amortization expense	526	620
Deferred income taxes	(240)	(327)
Stock compensation expense	118	106
Increase in cash value of life insurance	(118)	(128)
Gain on life insurance		(94)
Loss on sale of securities and time deposits	97	95
Provision for loan losses	750	513
Proceeds from sales of loans	22,264	26,679
Loans originated for sale	(22,959)	(25,575)
Gain on sale of loans	(418)	(530)
Amortization of tax credit investment	169	164
Unrealized gain on equity securities	(117)
Net realized and unrealized loss on foreclosed real estate	273	466
(Increase) decrease in accrued interest receivable	(159)	18
Increase in accrued interest payable	22	6
Net change in other assets/liabilities	73	(799)
Net Cash Provided By Operating Activities	6,099	6,304
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of interest-bearing time deposits	1,180	1,488
Proceeds from sales of interest-bearing time deposits	1,460
Purchase of interest-bearing time deposits	(1,185)
Purchase of securities available for sale	(31,956)	(13,657)
Proceeds from maturities of securities available for sale	22,645	870
Proceeds from sales of securities available for sale	5,437	14,345
Principal collected on mortgage-backed obligations	11,835	12,742
Investment in cash value of life insurance		(1,000)
Net increase in loans receivable	(26,535)	(10,355)
Investment in tax credit entities	(392)	(691)
Proceeds from sale of foreclosed real estate	77	214
Purchase of Federal Home Loan Bank stock		(9)
Purchase of premises and equipment	(635)	(123)
Proceeds from settlement of bank-owned life insurance policies		127
Net Cash Provided By (Used In) Investing Activities	(18,069)	3,951
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	32,981	37,274
Repayment of advances from Federal Home Loan Bank		(10,000)
Purchase of treasury stock	(2)
Dividends paid	(1,595)	(1,558)
Net Cash Provided By Financing Activities	31,384	25,716
Net Increase in Cash and Cash Equivalents	19,414	35,971
Cash and cash equivalents at beginning of period	41,112	25,915
Cash and Cash Equivalents at End of Period	$ 60,526	$ 61,886

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Note 1 - Presentation of Interim Information

6 Months Ended

Jun. 30, 2019

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 financial holding company for First Harrison Bank (“Bank”), an Indiana chartered commercial 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

eight

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.

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

June 30, 2019,

and the results of operations for the

three

months and

six

months ended

June 30, 2019

and

2018

and the cash flows for the

six

months ended

June 30, 2019

and

2018.

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, 2018

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

6 Months Ended

Jun. 30, 2019

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

June 30, 2019

and

December 31, 2018

are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
June 30, 2019
Securities available for sale:
Agency mortgage-backed securities	$	85,363	$	85	$	790	$	84,658
Agency CMO		40,181		212		167		40,226
Other debt securities:
Agency notes and bonds		64,219		480		240		64,459
Municipal obligations		67,823		2,285		6		70,102
Total securities available for sale	$	257,586	$	3,062	$	1,203	$	259,445
December 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	94,746	$	-	$	3,489	$	91,257
Agency CMO		33,222		152		382		32,992
Other debt securities:
Agency notes and bonds		75,461		59		1,016		74,504
Municipal obligations		63,008		651		571		63,088
Total securities available for sale	$	266,437	$	862	$	5,458	$	261,841

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

June 30, 2019,

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		Fair
	Cost		Value
(In thousands)
Due in one year or less	$	22,421	$	22,316
Due after one year through five years		50,972		51,415
Due after five years through ten years		32,877		33,809
Due after ten years		25,772		27,021
		132,042		134,561
Mortgage-backed securities and CMO		125,544		124,884
	$	257,586	$	259,445

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

June 30, 2019,

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

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency CMO		3	$	3,792	$	33
Total less than twelve months		3		3,792		33
Continuous loss position more than twelve months:
Agency mortgage-backed securities		74		72,485		790
Agency CMO		20		10,939		134
Agency notes and bonds		13		45,138		240
Municipal obligations		5		1,864		6
Total more than twelve months		112		130,426		1,170
Total securities available for sale		115	$	134,218	$	1,203

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

December 31, 2018,

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

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		1	$	1,563	$	13
Agency CMO		4		2,870		1
Agency notes and bonds		1		499		1
Municipal obligations		11		3,552		12
Total less than twelve months		17		8,484		27
Continuous loss position more than twelve months:
Agency mortgage-backed securities		97		89,680		3,476
Agency CMO		24		12,168		381
Agency notes and bonds		22		67,927		1,015
Municipal obligations		49		25,316		559
Total more than twelve months		192		195,091		5,431
Total securities available for sale		209	$	203,575	$	5,458

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

June 30, 2019,

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

0.9%

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

June 30, 2019,

additional deterioration in market and economic conditions

may

have an adverse impact on credit quality in the future.

During the

six

months ended

June 30, 2019,

the Company realized gross losses of

$86,000

on sales of available for sale securities and gross losses of

$11,000

on sales of time deposits. There were

no

sales during the

three

months ended

June 30, 2019.

During the

three

months ended

June 30, 2018,

the Company realized gross gains of

$211,000

and gross losses of

$307,000

on sales of available for sale securities. During the

six

months ended

June 30, 2018,

the Company realized gross gains of

$218,000

and gross losses of

$313,000

on sales of available for sale securities.

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

June 30, 2019

and

December 31, 2018.

Equity Securities

In

September 2018,

the Company acquired

90,000

shares of common stock in another bank holding company, representing approximately

5%

of the outstanding common stock of the entity, for a total investment of

$1.9

million. During the

three

months ended

June 30, 2019,

the Company recognized an unrealized loss of

$14,000

on this equity investment. During the

six

months ended

June 30, 2019,

the Company recognized an unrealized gain of

$117,000

on this equity investment. At

June 30, 2019

and

December 31, 2018,

the equity investment had a fair value of

$1.8

million and

$1.7

million, respectively, and is included in other assets on the consolidated balance sheets.

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Note 3 - Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2019

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

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.

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 loans

not

considered to 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 for qualitative factors that are reviewed on a quarterly basis based on the risks present for each portfolio segment. Management considers changes and trends in the following qualitative loss factors: underwriting standards, economic conditions, changes and trends in past due and classified loans, collateral valuations, loan concentrations 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

June 30, 2019

and

December 31, 2018.

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, 2018.

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

June 30, 2019

and

December 31, 2018,

the balance of foreclosed real estate includes

$84,000

and

$33,000,

respectively, of residential real estate properties where physical possession has been obtained. At

June 30, 2019

and

December 31, 2018,

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

$329,000

and

$365,000,

respectively.

Loans at

June 30, 2019

and

December 31, 2018

consisted of the following:

	June 30,			December 31,
(In thousands)	2019			2018
Real estate mortgage loans:
Residential	$	140,035		$	136,445
Land		22,584			22,607
Residential construction		32,639			31,459
Commercial real estate		111,862			107,445
Commercial real estate construction		20,797			20,591
Commercial business loans		41,621			36,297
Consumer loans:
Home equity and second mortgage loans		54,220			51,731
Automobile loans		44,870			42,124
Loans secured by savings accounts		1,354			1,399
Unsecured loans		3,598			3,638
Other consumer loans		10,473			10,169
Gross loans		484,053			463,905
Less undisbursed portion of loans in process		(20,644	)		(26,675	)
Principal loan balance		463,409			437,230
Deferred loan origination fees, net		1,128			1,095
Allowance for loan losses		(4,609	)		(4,065	)
Loans, net	$	459,928		$	434,260

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

June 30, 2019:

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	140,035	$	22,584	$	32,792		$	111,862		$	41,621	$	54,220	$	60,295	$	463,409
Accrued interest receivable		488		97		108			264			137		263		257		1,614
Net deferred loan origination fees and costs		118		18		(7	)		(44	)		-		1,043		-		1,128
Recorded investment in loans	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	1,870	$	192	$	-		$	882		$	400	$	28	$	4	$	3,376
Collectively evaluated for impairment		138,488		22,507		32,893			111,157			41,358		55,498		60,548		462,449
Acquired with deteriorated credit quality		283		-		-			43			-		-		-		326
Ending balance	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151

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

December 31, 2018:

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,445	$	22,607	$	25,375		$	107,445		$	36,297	$	51,731	$	57,330	$	437,230
Accrued interest receivable		475		119		76			265			120		247		228		1,530
Net deferred loan origination fees and costs		99		18		(9	)		(38	)		-		1,025		-		1,095
Recorded investment in loans	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,184	$	152	$	521		$	466		$	427	$	35	$	-	$	3,785
Collectively evaluated for impairment		134,553		22,592		24,921			107,158			35,990		52,968		57,558		435,740
Acquired with deteriorated credit quality		282		-		-			48			-		-		-		330
Ending balance	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855

An analysis of the allowance for loan losses as of

June 30, 2019

is as follows:

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2	$	-	$	-	$	32	$	-	$	-	$	-	$	34
Collectively evaluated for impairment		752		170		316		1,420		596		472		849		4,575
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	754	$	170	$	316	$	1,452	$	596	$	472	$	849	$	4,609

An analysis of the allowance for loan losses as of

December 31, 2018

is as follows:

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	-	$	-	$	44	$	1	$	-	$	-	$	48
Collectively evaluated for impairment		690		162		224		1,357		458		443		683		4,017
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	693	$	162	$	224	$	1,401	$	459	$	443	$	683	$	4,065

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

three

months and

six

months ended

June 30, 2019

is as follows:

	Residential							Commercial		Commercial		Home Equity  &			Other
	Real Estate			Land		Construction		Real Estate		Business		2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2019
Beginning balance	$	727		$	164	$	291	$	1,391	$	541	$	450		$	775		$	4,339
Provisions for loan losses		4			6		25		61		55		20			129			300
Charge-offs		(92	)		-		-		-		-		(2	)		(119	)		(213	)
Recoveries		115			-		-		-		-		4			64			183
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609
Changes in Allowance for Loan Losses for the six-months ended June 30, 2019
Beginning balance	$	693		$	162	$	224	$	1,401	$	459	$	443		$	683		$	4,065
Provisions for loan losses		75			8		92		51		137		25			362			750
Charge-offs		(130	)		-		-		-		-		(2	)		(300	)		(432	)
Recoveries		116			-		-		-		-		6			104			226
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609

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

three

months and

six

months ended

June 30, 2018

is as follows:

	Residential									Commercial			Commercial			Home Equity  &			Other
	Real Estate			Land			Construction			Real Estate			Business			2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2018
Beginning balance	$	301		$	156		$	291		$	1,520		$	276		$	680		$	407		$	3,631
Provisions for loan losses		398			(8	)		(75	)		(237	)		141			(75	)		172			316
Charge-offs		(15	)		0			0			0			0			(13	)		(138	)		(166	)
Recoveries		4			0			0			23			0			15			44			86
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867
Changes in Allowance for Loan Losses for the six-months ended June 30, 2018
Beginning balance	$	219		$	133		$	245		$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		538			15			(29	)		(348	)		126			(109	)		320			513
Charge-offs		(75	)		0			0			0			(1	)		(12	)		(334	)		(422	)
Recoveries		6			0			0			32			1			18			85			142
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867

At

June 30, 2019

and

December 31, 2018,

management applied qualitative factor adjustments to various portfolio segments which increased the estimated allowance for loan losses related to those portfolio segments by approximately

$3.3

million and

$3.1

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

June 30, 2019

and

December 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

$320,000

and

$333,000

at

June 30, 2019

and

December 31, 2018,

respectively. These factors were

not

adjusted during the period from

December 31, 2018

to

June 30, 2019.

Additional discussion of the Bank’s allowance for loan loss methodology can be found in the Company’s Annual Report on Form

10

-K for the year ended

December 31, 2018.

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

June 30, 2019

and for the

three

months and

six

months ended

June 30, 2019.

The Company did

not

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

three

or

six

month periods ended

June 30, 2019:

	At June 30, 2019						Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	1,857	$	2,120	$	-	$	2,025	$	3	$	2,073	$	6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		683		692		-		467		8		396		11
Commercial business		374		427		-		385		3		390		6
Home equity/2nd mortgage		28		38		-		27		-		29		-
Other consumer		4		-		-		2		-		1		-
		3,138		3,471		-		3,360		14		3,416		23
Loans with an allowance recorded:
Residential		13		14		2		75		-		55		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		199		208		32		203		-		135		-
Commercial business		26		30		-		26		-		88		-
Home equity/2nd mortgage		-		-		-		-		-		9		-
Other consumer		-		-		-		-		-		-		-
		238		252		34		304		-		287		-
Total:
Residential		1,870		2,134		2		2,100		3		2,128		6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		882		900		32		670		8		531		11
Commercial business		400		457		-		411		3		478		6
Home equity/2nd mortgage		28		38		-		27		-		38		-
Other consumer		4		-		-		2		-		1		-
	$	3,376	$	3,723	$	34	$	3,664	$	14	$	3,703	$	23

The following table summarizes the Company’s impaired loans for the

three

months and

six

months ended

June 30, 2018.

The Company did

not

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

three

or

six

month periods ended

June 30, 2018:

	Three Months Ended June 30, 2018				Six  Months Ended June 30, 2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Loans with no related allowance recorded:
Residential	$	2,327	$	5	$	2,449	$	13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		254		4		173		7
Home equity/2nd mortgage		77		0		71		1
Other consumer		8		1		5		1
		3,192		15		3,182		32
Loans with an allowance recorded:
Residential		267		0		248		0
Land		0		0		0		0
Construction		0		0		0		0
Commercial real estate		0		0		0		0
Commercial business		28		0		29		0
Home equity/2nd mortgage		7		0		9		0
Other consumer		0		0		0		0
		302		0		286		0
Total:
Residential		2,594		5		2,697		13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		282		4		202		7
Home equity/2nd mortgage		84		0		80		1
Other consumer		8		1		5		1
	$	3,494	$	15	$	3,468	$	32

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

December 31, 2018:

			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,170	$	2,409	$	-
Land		152		153		-
Construction		521		521		-
Commercial real estate		255		260		-
Commercial business		400		451		-
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
		3,533		3,838		-
Loans with an allowance recorded:
Residential		14		15		3
Land		-		-		-
Construction		-		-		-
Commercial real estate		211		213		44
Commercial business		27		30		1
Home equity/2nd mortgage		-		-		-
Other consumer		-		-		-
		252		258		48
Total:
Residential		2,184		2,424		3
Land		152		153		-
Construction		521		521		-
Commercial real estate		466		473		44
Commercial business		427		481		1
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
	$	3,785	$	4,096	$	48

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

June 30, 2019

and

December 31, 2018:

	June 30, 2019						December 31, 2018
			Loans 90+ Days		Total				Loans 90+ Days		Total
	Nonaccrual		Past Due		Nonperforming		Nonaccrual		Past Due		Nonperforming
	Loans		Still Accruing		Loans		Loans		Still Accruing		Loans
	(In thousands)
Residential	$	1,713	$	76	$	1,789	$	1,769	$	-	$	1,769
Land		192		-		192		152		-		152
Construction		-		-		-		521		-		521
Commercial real estate		351		-		351		371		-		371
Commercial business		198		-		198		207		-		207
Home equity/2nd mortgage		28		-		28		35		-		35
Other consumer		-		5		5		-		2		2
Total	$	2,482	$	81	$	2,563	$	3,055	$	2	$	3,057

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

June 30, 2019:

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	3,254	$	620	$	1,168	$	5,042	$	135,316	$	283	$	140,641
Land		163		104		156		423		22,276		-		22,699
Construction		-		-		-		-		32,893		-		32,893
Commercial real estate		346		-		-		346		111,693		43		112,082
Commercial business		63		55		143		261		41,497		-		41,758
Home equity/2nd mortgage		288		-		28		316		55,210		-		55,526
Other consumer		391		7		5		403		60,149		-		60,552
Total	$	4,505	$	786	$	1,500	$	6,791	$	459,034	$	326	$	466,151

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

December 31, 2018:

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	2,617	$	926	$	1,189	$	4,732	$	132,005	$	282	$	137,019
Land		247		39		152		438		22,306		-		22,744
Construction		-		-		-		-		25,442		-		25,442
Commercial real estate		450		-		-		450		107,174		48		107,672
Commercial business		377		-		145		522		35,895		-		36,417
Home equity/2nd mortgage		191		-		35		226		52,777		-		53,003
Other consumer		491		50		2		543		57,015		-		57,558
Total	$	4,373	$	1,015	$	1,523	$	6,911	$	432,614	$	330	$	439,855

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						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
June 30, 2019
Pass	$	137,676	$	22,051	$	32,698	$	109,023	$	40,665	$	55,416	$	60,552	$	458,081
Special Mention		48		330		195		1,742		633		-		-		2,948
Substandard		1,131		126		-		966		262		82		-		2,567
Doubtful		1,786		192		-		351		198		28		-		2,555
Loss		-		-		-		-		-		-		-		-
Total	$	140,641	$	22,699	$	32,893	$	112,082	$	41,758	$	55,526	$	60,552	$	466,151
December 31, 2018
Pass	$	133,878	$	22,458	$	24,921	$	104,843	$	35,162	$	52,859	$	57,529	$	431,650
Special Mention		133		65		-		1,520		763		-		29		2,510
Substandard		1,168		69		-		938		285		109		-		2,569
Doubtful		1,840		152		521		371		207		35		-		3,126
Loss		-		-		-		-		-		-		-		-
Total	$	137,019	$	22,744	$	25,442	$	107,672	$	36,417	$	53,003	$	57,558	$	439,855

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

June 30, 2019

and

December 31, 2018:

	June 30, 2019								December 31, 2018
							Related Allowance								Related Allowance
	Accruing		Nonaccrual		Total		for Loan Losses		Accruing		Nonaccrual		Total		for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	145	$	290	$	435	$	-	$	295	$	302	$	597	$	-
Commercial real estate		529		347		876		32		190		371		561		44
Commercial business		202		-		202		-		218		-		218		-
Total	$	876	$	637	$	1,513	$	32	$	703	$	673	$	1,376	$	44

At

June 30, 2019

and

December 31, 2018,

there were

no

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

The Company restructured

two

commercial real estate loans during the

three

and

six

months ended

June 30, 2019,

with pre-modification and post-modification aggregate balances of

$436,000.

The Company restructured

one

commercial business loan during the

six

months ended

June 30, 2018,

with a pre-modification and post-modification balance of

$179,000.

There were

no

TDRs that were restructured during the

three

months ended

June 30, 2018.

For the TDRs restructured in

2019

and

2018,

the terms of modification included an extension and the deferral of contractual principal payments.

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

and

six

months ended

June 30, 2019

or

2018.

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

and

six

months ended

June 30, 2019

and

2018.

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. The Company did

not

recognize any provisions for loan losses or net charge-offs as a result of defaulted TDRs for the

three

and

six

months ended

June 30, 2019

and

2018.

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

June 30, 2019

and

December 31, 2018:

	June 30,		December 31,
(In thousands)	2019		2018
Residential real estate	$	283	$	282
Commercial real estate		43		48
Carrying amount		326		330
Allowance for loan losses		-		-
Carrying amount, net of allowance	$	326	$	330

The outstanding balance of PCI loans accounted for under ASC

310

-

30,

including contractual principal, interest, fees and penalties was

$503,000

and

$519,000

at

June 30, 2019

and

December 31, 2018,

respectively.

There was

no

allowance for loan losses related to PCI loans at

June 30, 2019

and

December 31, 2018.

There was a

$2,000

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

six

-month period ended

June 30, 2018.

There were

no

net provisions for loans losses related to PCI loans for the

three

-month period ended

June 30, 2018

or for the

three

-month or

six

-month periods ended

June 30, 2019.

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

three

and

six

month periods ended

June 30, 2019

and

2018:

	Three Months Ended						Six Months Ended
	6/30/2019			6/30/2018			6/30/2019			6/30/2018
Balance at beginning of period	$	409		$	459		$	423		$	470
New loans purchased		-			-			-			-
Accretion to income		(12	)		(15	)		(24	)		(29	)
Disposals and other adjustments		-			-			-			-
Reclassification (to) from nonaccretable difference		(7	)		(1	)		(9	)		2
Balance at end of period	$	390		$	443		$	390		$	443

XML

Note 4 - Qualified Affordable Housing Project Investment

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Investment [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

June 30, 2019

and

December 31, 2018,

the balance of the Bank’s investment was

$3.4

million and

$3.6

million, respectively, and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the qualified affordable housing project investment at

June 30, 2019

and

December 31, 2018

was

$2.5

million and

$2.9

million, respectively, and is reflected in other liabilities on the consolidated balance sheets. 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

month periods ended

June 30, 2019

and

2018,

the Bank recognized amortization expense of

$87,000

and

$82,000,

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

three

month periods ended

June 30, 2019

and

2018,

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

$123,000

and

$98,000,

respectively. During the

six

month periods ended

June 30, 2019

and

2018,

the Bank recognized amortization expense of

$169,000

and

$164,000,

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

six

month periods ended

June 30, 2019

and

2018,

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

$248,000

and

$196,000,

respectively.

XML

Note 5 - Supplemental Disclosure for Earnings Per Share

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

5. Supplemental Disclosure for Earnings Per Share

	Three Months Ended				Six Months Ended
	6/30/2019		6/30/2018		6/30/2019		6/30/2018
Basic	(Dollars in thousands, except for share and per share data)
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Net income attributable to First Capital, Inc. per common share, basic	$	0.86	$	0.63	$	1.50	$	1.27
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Add: Dilutive effect of restricted stock		11,976		7,041		11,110		6,401
Weighted average common shares outstanding, as adjusted		3,341,813		3,333,838		3,340,950		3,333,033
Net income attributable to First Capital, Inc. per common share, diluted	$	0.86	$	0.63	$	1.50	$	1.27

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 and

six

-month periods ended

June 30, 2019

and

2018.

XML

Note 6 - Stock-based Compensation Plan

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

6. Stock-Based Compensation Plans

On

May 20, 2009,

the Company adopted the

2009

Equity Incentive Plan (the

“2009

Plan”) which terminated as of

May 20, 2019.

The

2009

Plan provided 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

2009

Plan could

not

exceed

223,000

shares and

176,150

shares were still available for issuance under the

2009

Plan at its termination.

On

May 22, 2019,

the Company adopted the

2019

Equity Incentive Plan (the

“2019

Plan”). The

2019

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

2019

Plan

may

not

exceed

176,150

shares. If an award under the

2009

Plan is canceled, terminates, expires, is forfeited or lapses for any reason, any issued shares subject to the award shall

not

be available for issuance pursuant to awards subsequently granted under the

2019

Plan. Further,

no

additional participants, as that term is defined in the

2009

Plan, are eligible for grants of awards under the

2009

Plan.

At

June 30, 2019,

176,150

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

2019

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

2019

Plan

may

be granted either alone, in addition to, or in tandem with, any other award granted under the

2019

Plan. The terms of the

2019

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

June 30, 2019,

no

stock options had been granted under the plans.

On

February 19, 2019,

the Company granted

9,750

restricted stock shares under the

2009

Plan to directors, officers and key employees at a grant-date price of

$52.09

per share for a total of

$508,000.

The restricted stock vests ratably from the grant date through

July 1, 2024,

with

20%

of the shares vesting each year on

July 1

beginning

July 1, 2020.

On

February 20, 2018,

the Company granted

20,000

restricted stock shares under the

2009

Plan 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.

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 and

six

-month periods ended

June 30, 2019

amounted to

$62,000

and

$118,000,

respectively. Compensation expense related to restricted stock recognized for the

three

-month and

six

-month periods ended

June 30, 2018

amounted to

$57,000

and

$106,000,

respectively.

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

June 30, 2019

and changes during the

six

-month period then ended is presented below.

			Weighted
	Number		Average
	of		Grant Date
	Shares		Fair Value
Nonvested at January 1, 2019		24,900	$	34.10
Granted		9,750		52.09
Vested		-		-
Forfeited		-		-
Nonvested at June 30, 2019		34,650	$	39.16

At

June 30, 2019,

there was

$1.1

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

5.0

years.

XML

Note 7 - Supplemental Disclosures of Cash Flow Information

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

7. Supplemental Disclosures of Cash Flow Information

	Six Months Ended
	June 30,
	2019		2018
	( In thousands )
Cash payments for:
Interest	$	926	$	731
Taxes (net of refunds received)		642		705
Noncash investing activities:
Transfers from loans to real estate acquired
through foreclosure		206		176

XML

Note 8 - Fair Value Measurements

6 Months Ended

Jun. 30, 2019

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. A quoted market price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
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

June 30, 2019

and

December 31, 2018.

The Company had

no

liabilities measured at fair value as of

June 30, 2019

or

December 31, 2018.

	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
June 30, 2019
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	84,658	$	-	$	84,658
Agency CMO		-		40,226		-		40,226
Agency notes and bonds		-		64,459		-		64,459
Municipal obligations		-		70,102		-		70,102
Total securities available for sale	$	-	$	259,445	$	-	$	259,445
Equity securities	$	1,832	$	-	$	-		1,832
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	1,868	$	1,868
Land		-		-		192		192
Commercial real estate		-		-		850		850
Commercial business		-		-		400		400
Home equity and second mortgage		-		-		28		28
Other consumer		-		-		4		4
Total impaired loans	$	-	$	-	$	3,342	$	3,342
Loans held for sale	$	-	$	3,962	$	-	$	3,962
Foreclosed real estate:
Residential real estate	$	-	$	-	$	84	$	84
Commercial real estate		-		-		2,825		2,825
Total foreclosed real estate	$	-	$	-	$	2,909	$	2,909
December 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	91,257	$	-	$	91,257
Agency CMO		-		32,992		-		32,992
Agency notes and bonds		-		74,504		-		74,504
Municipal obligations		-		63,088		-		63,088
Total securities available for sale	$	-	$	261,841	$	-	$	261,841
Equity securities	$	1,715	$	-	$	-		1,715
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,181	$	2,181
Land		-		-		152		152
Construction		-		-		521		521
Commercial real estate		-		-		422		422
Commercial business		-		-		426		426
Home equity and second mortgage		-		-		35		35
Total impaired loans	$	-	$	-	$	3,737	$	3,737
Loans held for sale	$	-	$	2,849	$	-	$	2,849
Foreclosed real estate:
Residential real estate	$	-	$	-	$	33	$	33
Commercial real estate		-		-		3,109		3,109
Total foreclosed real estate	$	-	$	-	$	3,142	$	3,142

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 and Equity Securities

.

Securities classified as available for sale and equity securities 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. For securities where quoted market prices, market prices of similar securities or prices from an independent

third

party pricing service are

not

available, fair values are calculated using discounted cash flows or other market indicators and are classified within Level

3

of the fair value hierarchy. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect. Changes in fair value of equity securities are recorded in noninterest income on the consolidated statements of income.

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

June 30, 2019

and

December 31, 2018,

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

June 30, 2019,

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

11%

to

66%,

with a weighted average discount of

38%.

At

December 31, 2018,

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

20%

to

62%,

with a weighted average discount of

39%.

The Company recognized provisions for loan losses of

$12,000

and

$137,000

for the

six

months ended

June 30, 2019

and

2018,

respectively, for impaired loans. The Company recognized a reduction to the provision for loan losses of

$8,000

for the

three

months ended

June 30, 2019

and a provision of

$72,000

for the

three

months ended

June 30, 2018

for impaired loans.

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

June 30, 2019,

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

22%

to

73%,

with a weighted average of

24%.

At

December 31, 2018,

the discount from appraised value ranged from

10%

to

79%,

with a weighted average of

51%.

The Company recognized losses of

$354,000

to write down foreclosed real estate for the

six

months ended

June 30, 2019

and

$217,000

to write down foreclosed real estate for the

three

months ended

June 30, 2019.

The Company recognized losses of

$419,000

to write down foreclosed real estate for the

three

and

six

months ended

June 30, 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

six

month periods ended

June 30, 2019

and

2018.

There were

no

transfers into or out of the Company’s Level

3

financial assets for the

six

month periods ended

June 30, 2019

and

2018.

In addition, there were

no

transfers into or out of Levels

1

and

2

of the fair value hierarchy during the

six

month periods ended

June 30, 2019

and

2018.

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
June 30, 2019
Financial assets:
Cash and cash equivalents	$	60,526	$	60,526	$	60,526	$	-	$	-
Interest-bearing time deposits		6,245		6,340		-		6,340		-
Securities available for sale		259,445		259,445		-		259,445		-
Loans held for sale		3,962		4,033		-		4,033		-
Loans, net		459,928		472,960		-		-		472,960
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,987		2,987		-		2,987		-
Equity securities (included in other assets)		1,832		1,832		1,832		-		-
Financial liabilities:
Deposits		734,627		733,775		-		-		733,775
Accrued interest payable		172		172		-		172		-
December 31, 2018:
Financial assets:
Cash and cash equivalents	$	41,112	$	41,112	$	41,112	$	-	$	-
Interest-bearing time deposits		7,710		7,650		-		7,650		-
Securities available for sale		261,841		261,841		-		261,841		-
Loans held for sale		2,849		2,900		-		2,900		-
Loans, net		434,260		427,200		-		-		427,200
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,828		2,828		-		2,828		-
Equity securities (included in other assets)		1,715		1,715		1,715		-		-
Financial liabilities:
Deposits		701,646		699,864		-		-		699,864
Accrued interest payable		150		150		-		150		-

XML

Note 9 - Revenue From Contracts With Customers

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

9. Revenue from Contracts with Customers

Substantially 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

and

six

months ended

June 30, 2019

and

2018:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(In thousands)
Service charges on deposit accounts	$	516	$	545	$	977	$	1,054
ATM and debit card fees		729		643		1,376		1,243
Investment advisory income		146		130		244		218
Other		33		33		67		68
Revenue from contracts with customers		1,424		1,351		2,664		2,583
Net gains on loans and investments		246		194		438		435
Increase in cash value of life insurance		70		85		118		128
Other		28		106		53		116
Other noninterest income		344		385		609		679
Total noninterest income	$	1,768	$	1,736	$	3,273	$	3,262

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 stop payment charges and statement rendering, 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.

ATM and Debit Card Fees

: The Company earns ATM usage fees and interchange fees from debit cardholder transactions conducted through a payment network. ATM fees are recognized at the point in time the transaction occurs. 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.

Investment Advisory Income

: The Company earns trust, insurance commissions, brokerage commissions and annuities income from its contracts with 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 services and are generally assessed based on the market value of assets under management. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed. Other related fees, which are based on a fixed fee schedule, are recognized when the services are rendered.

Other Income:

Other income from contracts with customers includes safe deposit box fees and ACH origination fees. This revenue is recognized at the time the transaction is executed or over the period the Company satisfies the performance obligation.

XML

Note 10 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

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

February 2016,

the FASB issued Accounting Standards Update (“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. The adoption of this update as of

January 1, 2019

did

not

have a material impact on the Company’s consolidated financial position or results of operations. The Company also adopted all applicable practical expedients, including the option to

not

recognize lease assets and liabilities for short-term leases.

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. However, the magnitude of the adjustment is unknown. 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

July 2019,

the FASB voted to propose a delay in the effective date of ASU

2016

-

13

for smaller reporting companies (as defined by the SEC) and other non-SEC reporting entities. The proposal would delay the effective date to fiscal years beginning after

December 15, 2022,

including interim periods within those fiscal years. The Company is a smaller reporting company and would qualify for the delayed effective date if the proposal is approved by the FASB.

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.

The adoption of this update effective

January 1, 2019

did

not

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

In

August 2018,

the FASB issued ASU

No.

2018

-

13,

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

. The update removes, modifies and adds certain disclosure requirements for fair value measurements. Among other changes, entities will

no

longer be required to disclose the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level

3

fair value measurements, but will be required to disclose the range and weighted average of significant observable inputs used to develop Level

3

fair value measurements. The amendments in the update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019.

Early adoption is permitted upon issuance of the update. 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 11 - Sale of Foreclosed Real Estate

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Real Estate Disclosure [Text Block]

11. Sale of Foreclosed Real Estate

Foreclosed real estate at

June 30, 2019

includes

one

commercial property valued at

$2.8

million. On

June 6, 2019,

the Company signed a Purchase Agreement to sell the property for

$2.8

million, net of broker commissions and other costs, and wrote the property down to its net realizable value. The sale of the property was completed on

July 19, 2019.

XML

Note 2 - Investment Securities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Marketable Securities [Table Text Block]

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
June 30, 2019
Securities available for sale:
Agency mortgage-backed securities	$	85,363	$	85	$	790	$	84,658
Agency CMO		40,181		212		167		40,226
Other debt securities:
Agency notes and bonds		64,219		480		240		64,459
Municipal obligations		67,823		2,285		6		70,102
Total securities available for sale	$	257,586	$	3,062	$	1,203	$	259,445
December 31, 2018
Securities available for sale:
Agency mortgage-backed securities	$	94,746	$	-	$	3,489	$	91,257
Agency CMO		33,222		152		382		32,992
Other debt securities:
Agency notes and bonds		75,461		59		1,016		74,504
Municipal obligations		63,008		651		571		63,088
Total securities available for sale	$	266,437	$	862	$	5,458	$	261,841

Investments Classified by Contractual Maturity Date [Table Text Block]

	Securities Available for Sale
	Amortized		Fair
	Cost		Value
(In thousands)
Due in one year or less	$	22,421	$	22,316
Due after one year through five years		50,972		51,415
Due after five years through ten years		32,877		33,809
Due after ten years		25,772		27,021
		132,042		134,561
Mortgage-backed securities and CMO		125,544		124,884
	$	257,586	$	259,445

Schedule of Unrealized Loss on Investments [Table Text Block]

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency CMO		3	$	3,792	$	33
Total less than twelve months		3		3,792		33
Continuous loss position more than twelve months:
Agency mortgage-backed securities		74		72,485		790
Agency CMO		20		10,939		134
Agency notes and bonds		13		45,138		240
Municipal obligations		5		1,864		6
Total more than twelve months		112		130,426		1,170
Total securities available for sale		115	$	134,218	$	1,203

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency mortgage-backed securities		1	$	1,563	$	13
Agency CMO		4		2,870		1
Agency notes and bonds		1		499		1
Municipal obligations		11		3,552		12
Total less than twelve months		17		8,484		27
Continuous loss position more than twelve months:
Agency mortgage-backed securities		97		89,680		3,476
Agency CMO		24		12,168		381
Agency notes and bonds		22		67,927		1,015
Municipal obligations		49		25,316		559
Total more than twelve months		192		195,091		5,431
Total securities available for sale		209	$	203,575	$	5,458

XML

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

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	June 30,			December 31,
(In thousands)	2019			2018
Real estate mortgage loans:
Residential	$	140,035		$	136,445
Land		22,584			22,607
Residential construction		32,639			31,459
Commercial real estate		111,862			107,445
Commercial real estate construction		20,797			20,591
Commercial business loans		41,621			36,297
Consumer loans:
Home equity and second mortgage loans		54,220			51,731
Automobile loans		44,870			42,124
Loans secured by savings accounts		1,354			1,399
Unsecured loans		3,598			3,638
Other consumer loans		10,473			10,169
Gross loans		484,053			463,905
Less undisbursed portion of loans in process		(20,644	)		(26,675	)
Principal loan balance		463,409			437,230
Deferred loan origination fees, net		1,128			1,095
Allowance for loan losses		(4,609	)		(4,065	)
Loans, net	$	459,928		$	434,260

Financing Receivable, Current, Allowance for Credit Loss [Table Text Block]

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2	$	-	$	-	$	32	$	-	$	-	$	-	$	34
Collectively evaluated for impairment		752		170		316		1,420		596		472		849		4,575
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	754	$	170	$	316	$	1,452	$	596	$	472	$	849	$	4,609

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3	$	-	$	-	$	44	$	1	$	-	$	-	$	48
Collectively evaluated for impairment		690		162		224		1,357		458		443		683		4,017
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Ending balance	$	693	$	162	$	224	$	1,401	$	459	$	443	$	683	$	4,065

	Residential							Commercial		Commercial		Home Equity  &			Other
	Real Estate			Land		Construction		Real Estate		Business		2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2019
Beginning balance	$	727		$	164	$	291	$	1,391	$	541	$	450		$	775		$	4,339
Provisions for loan losses		4			6		25		61		55		20			129			300
Charge-offs		(92	)		-		-		-		-		(2	)		(119	)		(213	)
Recoveries		115			-		-		-		-		4			64			183
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609
Changes in Allowance for Loan Losses for the six-months ended June 30, 2019
Beginning balance	$	693		$	162	$	224	$	1,401	$	459	$	443		$	683		$	4,065
Provisions for loan losses		75			8		92		51		137		25			362			750
Charge-offs		(130	)		-		-		-		-		(2	)		(300	)		(432	)
Recoveries		116			-		-		-		-		6			104			226
Ending balance	$	754		$	170	$	316	$	1,452	$	596	$	472		$	849		$	4,609

	Residential									Commercial			Commercial			Home Equity  &			Other
	Real Estate			Land			Construction			Real Estate			Business			2nd Mtg			Consumer			Total
	(In thousands)
Allowance for loan losses:
Changes in Allowance for Loan Losses for the three-months ended June 30, 2018
Beginning balance	$	301		$	156		$	291		$	1,520		$	276		$	680		$	407		$	3,631
Provisions for loan losses		398			(8	)		(75	)		(237	)		141			(75	)		172			316
Charge-offs		(15	)		0			0			0			0			(13	)		(138	)		(166	)
Recoveries		4			0			0			23			0			15			44			86
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867
Changes in Allowance for Loan Losses for the six-months ended June 30, 2018
Beginning balance	$	219		$	133		$	245		$	1,622		$	291		$	710		$	414		$	3,634
Provisions for loan losses		538			15			(29	)		(348	)		126			(109	)		320			513
Charge-offs		(75	)		0			0			0			(1	)		(12	)		(334	)		(422	)
Recoveries		6			0			0			32			1			18			85			142
Ending balance	$	688		$	148		$	216		$	1,306		$	417		$	607		$	485		$	3,867

Impaired Financing Receivables [Table Text Block]

	At June 30, 2019						Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(In thousands)
Loans with no related allowance recorded:
Residential	$	1,857	$	2,120	$	-	$	2,025	$	3	$	2,073	$	6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		683		692		-		467		8		396		11
Commercial business		374		427		-		385		3		390		6
Home equity/2nd mortgage		28		38		-		27		-		29		-
Other consumer		4		-		-		2		-		1		-
		3,138		3,471		-		3,360		14		3,416		23
Loans with an allowance recorded:
Residential		13		14		2		75		-		55		-
Land		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Commercial real estate		199		208		32		203		-		135		-
Commercial business		26		30		-		26		-		88		-
Home equity/2nd mortgage		-		-		-		-		-		9		-
Other consumer		-		-		-		-		-		-		-
		238		252		34		304		-		287		-
Total:
Residential		1,870		2,134		2		2,100		3		2,128		6
Land		192		194		-		191		-		178		-
Construction		-		-		-		263		-		349		-
Commercial real estate		882		900		32		670		8		531		11
Commercial business		400		457		-		411		3		478		6
Home equity/2nd mortgage		28		38		-		27		-		38		-
Other consumer		4		-		-		2		-		1		-
	$	3,376	$	3,723	$	34	$	3,664	$	14	$	3,703	$	23

	Three Months Ended June 30, 2018				Six  Months Ended June 30, 2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Loans with no related allowance recorded:
Residential	$	2,327	$	5	$	2,449	$	13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		254		4		173		7
Home equity/2nd mortgage		77		0		71		1
Other consumer		8		1		5		1
		3,192		15		3,182		32
Loans with an allowance recorded:
Residential		267		0		248		0
Land		0		0		0		0
Construction		0		0		0		0
Commercial real estate		0		0		0		0
Commercial business		28		0		29		0
Home equity/2nd mortgage		7		0		9		0
Other consumer		0		0		0		0
		302		0		286		0
Total:
Residential		2,594		5		2,697		13
Land		214		0		142		0
Construction		0		0		0		0
Commercial real estate		312		5		342		10
Commercial business		282		4		202		7
Home equity/2nd mortgage		84		0		80		1
Other consumer		8		1		5		1
	$	3,494	$	15	$	3,468	$	32

			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In thousands)
Loans with no related allowance recorded:
Residential	$	2,170	$	2,409	$	-
Land		152		153		-
Construction		521		521		-
Commercial real estate		255		260		-
Commercial business		400		451		-
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
		3,533		3,838		-
Loans with an allowance recorded:
Residential		14		15		3
Land		-		-		-
Construction		-		-		-
Commercial real estate		211		213		44
Commercial business		27		30		1
Home equity/2nd mortgage		-		-		-
Other consumer		-		-		-
		252		258		48
Total:
Residential		2,184		2,424		3
Land		152		153		-
Construction		521		521		-
Commercial real estate		466		473		44
Commercial business		427		481		1
Home equity/2nd mortgage		35		44		-
Other consumer		-		-		-
	$	3,785	$	4,096	$	48

Financing Receivable, Nonaccrual [Table Text Block]

	June 30, 2019						December 31, 2018
			Loans 90+ Days		Total				Loans 90+ Days		Total
	Nonaccrual		Past Due		Nonperforming		Nonaccrual		Past Due		Nonperforming
	Loans		Still Accruing		Loans		Loans		Still Accruing		Loans
	(In thousands)
Residential	$	1,713	$	76	$	1,789	$	1,769	$	-	$	1,769
Land		192		-		192		152		-		152
Construction		-		-		-		521		-		521
Commercial real estate		351		-		351		371		-		371
Commercial business		198		-		198		207		-		207
Home equity/2nd mortgage		28		-		28		35		-		35
Other consumer		-		5		5		-		2		2
Total	$	2,482	$	81	$	2,563	$	3,055	$	2	$	3,057

Financing Receivable, Past Due [Table Text Block]

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	3,254	$	620	$	1,168	$	5,042	$	135,316	$	283	$	140,641
Land		163		104		156		423		22,276		-		22,699
Construction		-		-		-		-		32,893		-		32,893
Commercial real estate		346		-		-		346		111,693		43		112,082
Commercial business		63		55		143		261		41,497		-		41,758
Home equity/2nd mortgage		288		-		28		316		55,210		-		55,526
Other consumer		391		7		5		403		60,149		-		60,552
Total	$	4,505	$	786	$	1,500	$	6,791	$	459,034	$	326	$	466,151

											Purchased
	30-59 Days		60-89 Days		90 Days or More		Total				Credit		Total
	Past Due		Past Due		Past Due		Past Due		Current		Impaired Loans		Loans
	(In thousands)
Residential	$	2,617	$	926	$	1,189	$	4,732	$	132,005	$	282	$	137,019
Land		247		39		152		438		22,306		-		22,744
Construction		-		-		-		-		25,442		-		25,442
Commercial real estate		450		-		-		450		107,174		48		107,672
Commercial business		377		-		145		522		35,895		-		36,417
Home equity/2nd mortgage		191		-		35		226		52,777		-		53,003
Other consumer		491		50		2		543		57,015		-		57,558
Total	$	4,373	$	1,015	$	1,523	$	6,911	$	432,614	$	330	$	439,855

Financing Receivable Credit Quality Indicators [Table Text Block]

	Residential						Commercial		Commercial		Home Equity  &		Other
	Real Estate		Land		Construction		Real Estate		Business		2nd Mtg		Consumer		Total
	(In thousands)
June 30, 2019
Pass	$	137,676	$	22,051	$	32,698	$	109,023	$	40,665	$	55,416	$	60,552	$	458,081
Special Mention		48		330		195		1,742		633		-		-		2,948
Substandard		1,131		126		-		966		262		82		-		2,567
Doubtful		1,786		192		-		351		198		28		-		2,555
Loss		-		-		-		-		-		-		-		-
Total	$	140,641	$	22,699	$	32,893	$	112,082	$	41,758	$	55,526	$	60,552	$	466,151
December 31, 2018
Pass	$	133,878	$	22,458	$	24,921	$	104,843	$	35,162	$	52,859	$	57,529	$	431,650
Special Mention		133		65		-		1,520		763		-		29		2,510
Substandard		1,168		69		-		938		285		109		-		2,569
Doubtful		1,840		152		521		371		207		35		-		3,126
Loss		-		-		-		-		-		-		-		-
Total	$	137,019	$	22,744	$	25,442	$	107,672	$	36,417	$	53,003	$	57,558	$	439,855

Schedule of Troubled Debt Restructurings by Accrual Status [Table Text Block]

	June 30, 2019								December 31, 2018
							Related Allowance								Related Allowance
	Accruing		Nonaccrual		Total		for Loan Losses		Accruing		Nonaccrual		Total		for Loan Losses
	(In thousands)
Troubled debt restructurings:
Residential real estate	$	145	$	290	$	435	$	-	$	295	$	302	$	597	$	-
Commercial real estate		529		347		876		32		190		371		561		44
Commercial business		202		-		202		-		218		-		218		-
Total	$	876	$	637	$	1,513	$	32	$	703	$	673	$	1,376	$	44

Schedule of Purchased Credit Impaired Loans [Table Text Block]

	June 30,		December 31,
(In thousands)	2019		2018
Residential real estate	$	283	$	282
Commercial real estate		43		48
Carrying amount		326		330
Allowance for loan losses		-		-
Carrying amount, net of allowance	$	326	$	330

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

	Three Months Ended						Six Months Ended
	6/30/2019			6/30/2018			6/30/2019			6/30/2018
Balance at beginning of period	$	409		$	459		$	423		$	470
New loans purchased		-			-			-			-
Accretion to income		(12	)		(15	)		(24	)		(29	)
Disposals and other adjustments		-			-			-			-
Reclassification (to) from nonaccretable difference		(7	)		(1	)		(9	)		2
Balance at end of period	$	390		$	443		$	390		$	443

Financing Receivable [Member]

Notes Tables

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

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	140,035	$	22,584	$	32,792		$	111,862		$	41,621	$	54,220	$	60,295	$	463,409
Accrued interest receivable		488		97		108			264			137		263		257		1,614
Net deferred loan origination fees and costs		118		18		(7	)		(44	)		-		1,043		-		1,128
Recorded investment in loans	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	1,870	$	192	$	-		$	882		$	400	$	28	$	4	$	3,376
Collectively evaluated for impairment		138,488		22,507		32,893			111,157			41,358		55,498		60,548		462,449
Acquired with deteriorated credit quality		283		-		-			43			-		-		-		326
Ending balance	$	140,641	$	22,699	$	32,893		$	112,082		$	41,758	$	55,526	$	60,552	$	466,151

	Residential							Commercial			Commercial		Home Equity  &		Other
	Real Estate		Land		Construction			Real Estate			Business		2nd Mtg		Consumer		Total
	(In thousands)
Recorded Investment in Loans:
Principal loan balance	$	136,445	$	22,607	$	25,375		$	107,445		$	36,297	$	51,731	$	57,330	$	437,230
Accrued interest receivable		475		119		76			265			120		247		228		1,530
Net deferred loan origination fees and costs		99		18		(9	)		(38	)		-		1,025		-		1,095
Recorded investment in loans	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855
Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	2,184	$	152	$	521		$	466		$	427	$	35	$	-	$	3,785
Collectively evaluated for impairment		134,553		22,592		24,921			107,158			35,990		52,968		57,558		435,740
Acquired with deteriorated credit quality		282		-		-			48			-		-		-		330
Ending balance	$	137,019	$	22,744	$	25,442		$	107,672		$	36,417	$	53,003	$	57,558	$	439,855

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

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	Three Months Ended				Six Months Ended
	6/30/2019		6/30/2018		6/30/2019		6/30/2018
Basic	(Dollars in thousands, except for share and per share data)
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Net income attributable to First Capital, Inc. per common share, basic	$	0.86	$	0.63	$	1.50	$	1.27
Diluted
Earnings:
Net income attributable to First Capital, Inc.	$	2,860	$	2,100	$	5,007	$	4,233
Shares:
Weighted average common shares outstanding		3,329,837		3,326,797		3,329,840		3,326,632
Add: Dilutive effect of restricted stock		11,976		7,041		11,110		6,401
Weighted average common shares outstanding, as adjusted		3,341,813		3,333,838		3,340,950		3,333,033
Net income attributable to First Capital, Inc. per common share, diluted	$	0.86	$	0.63	$	1.50	$	1.27

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Note 6 - Stock-based Compensation Plan (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

			Weighted
	Number		Average
	of		Grant Date
	Shares		Fair Value
Nonvested at January 1, 2019		24,900	$	34.10
Granted		9,750		52.09
Vested		-		-
Forfeited		-		-
Nonvested at June 30, 2019		34,650	$	39.16

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

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	Six Months Ended
	June 30,
	2019		2018
	( In thousands )
Cash payments for:
Interest	$	926	$	731
Taxes (net of refunds received)		642		705
Noncash investing activities:
Transfers from loans to real estate acquired
through foreclosure		206		176

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Note 8 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

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
June 30, 2019
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	84,658	$	-	$	84,658
Agency CMO		-		40,226		-		40,226
Agency notes and bonds		-		64,459		-		64,459
Municipal obligations		-		70,102		-		70,102
Total securities available for sale	$	-	$	259,445	$	-	$	259,445
Equity securities	$	1,832	$	-	$	-		1,832
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	1,868	$	1,868
Land		-		-		192		192
Commercial real estate		-		-		850		850
Commercial business		-		-		400		400
Home equity and second mortgage		-		-		28		28
Other consumer		-		-		4		4
Total impaired loans	$	-	$	-	$	3,342	$	3,342
Loans held for sale	$	-	$	3,962	$	-	$	3,962
Foreclosed real estate:
Residential real estate	$	-	$	-	$	84	$	84
Commercial real estate		-		-		2,825		2,825
Total foreclosed real estate	$	-	$	-	$	2,909	$	2,909
December 31, 2018
Assets Measured on a Recurring Basis
Securities available for sale:
Agency mortgage-backed securities	$	-	$	91,257	$	-	$	91,257
Agency CMO		-		32,992		-		32,992
Agency notes and bonds		-		74,504		-		74,504
Municipal obligations		-		63,088		-		63,088
Total securities available for sale	$	-	$	261,841	$	-	$	261,841
Equity securities	$	1,715	$	-	$	-		1,715
Assets Measured on a Nonrecurring Basis
Impaired loans:
Residential real estate	$	-	$	-	$	2,181	$	2,181
Land		-		-		152		152
Construction		-		-		521		521
Commercial real estate		-		-		422		422
Commercial business		-		-		426		426
Home equity and second mortgage		-		-		35		35
Total impaired loans	$	-	$	-	$	3,737	$	3,737
Loans held for sale	$	-	$	2,849	$	-	$	2,849
Foreclosed real estate:
Residential real estate	$	-	$	-	$	33	$	33
Commercial real estate		-		-		3,109		3,109
Total foreclosed real estate	$	-	$	-	$	3,142	$	3,142

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
June 30, 2019
Financial assets:
Cash and cash equivalents	$	60,526	$	60,526	$	60,526	$	-	$	-
Interest-bearing time deposits		6,245		6,340		-		6,340		-
Securities available for sale		259,445		259,445		-		259,445		-
Loans held for sale		3,962		4,033		-		4,033		-
Loans, net		459,928		472,960		-		-		472,960
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,987		2,987		-		2,987		-
Equity securities (included in other assets)		1,832		1,832		1,832		-		-
Financial liabilities:
Deposits		734,627		733,775		-		-		733,775
Accrued interest payable		172		172		-		172		-
December 31, 2018:
Financial assets:
Cash and cash equivalents	$	41,112	$	41,112	$	41,112	$	-	$	-
Interest-bearing time deposits		7,710		7,650		-		7,650		-
Securities available for sale		261,841		261,841		-		261,841		-
Loans held for sale		2,849		2,900		-		2,900		-
Loans, net		434,260		427,200		-		-		427,200
FHLB and other restricted stock		1,988		N/A		N/A		N/A		N/A
Accrued interest receivable		2,828		2,828		-		2,828		-
Equity securities (included in other assets)		1,715		1,715		1,715		-		-
Financial liabilities:
Deposits		701,646		699,864		-		-		699,864
Accrued interest payable		150		150		-		150		-

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Note 9 - Revenue From Contracts With Customers (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(In thousands)
Service charges on deposit accounts	$	516	$	545	$	977	$	1,054
ATM and debit card fees		729		643		1,376		1,243
Investment advisory income		146		130		244		218
Other		33		33		67		68
Revenue from contracts with customers		1,424		1,351		2,664		2,583
Net gains on loans and investments		246		194		438		435
Increase in cash value of life insurance		70		85		118		128
Other		28		106		53		116
Other noninterest income		344		385		609		679
Total noninterest income	$	1,768	$	1,736	$	3,273	$	3,262

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Note 2 - Investment Securities (Details Textual) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Sep. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Available-for-Sale, Securities in Unrealized Loss Positions, Depreciation from Amortized Cost Percentage		0.90%		0.90%
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total				$ 0
Debt Securities, Available-for-sale, Realized Loss		$ 0	$ 307,000	86,000	$ 313,000
Debt Securities, Time Deposits, Realized Loss				11,000
Debt Securities, Available-for-sale, Realized Gain		0	$ 211,000		$ 218,000
Investment, Number of Shares Acquired	90,000
Investment Ownership Percentage	5.00%
Payments to Acquire Other Investments	$ 1,900,000
Equity Securities, FV-NI, Unrealized Loss		14,000
Equity Securities, FV-NI, Unrealized Gain				117,000
Equity Securities, FV-NI		$ 1,800,000		$ 1,800,000		$ 1,700,000

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Note 2 - Investment Securities - Investment Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale, amortized cost	$ 257,586	$ 266,437
Securities available for sale, gross unrealized gains	3,062	862
Securities available for sale, gross unrealized losses	1,203	5,458
Securities available for sale, fair value	259,445	261,841
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale, amortized cost	85,363	94,746
Securities available for sale, gross unrealized gains	85
Securities available for sale, gross unrealized losses	790	3,489
Securities available for sale, fair value	84,658	91,257
Agency Collateralized Mortgage Obligations [Member]
Securities available for sale, amortized cost	40,181	33,222
Securities available for sale, gross unrealized gains	212	152
Securities available for sale, gross unrealized losses	167	382
Securities available for sale, fair value	40,226	32,992
US Government Agencies Debt Securities [Member]
Securities available for sale, amortized cost	64,219	75,461
Securities available for sale, gross unrealized gains	480	59
Securities available for sale, gross unrealized losses	240	1,016
Securities available for sale, fair value	64,459	74,504
Municipal Notes [Member]
Securities available for sale, amortized cost	67,823	63,008
Securities available for sale, gross unrealized gains	2,285	651
Securities available for sale, gross unrealized losses	6	571
Securities available for sale, fair value	$ 70,102	$ 63,088

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Note 2 - Investment Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale, amortized cost, due in one year or less	$ 22,421
Securities available for sale, fair value, due in one year or less	22,316
Securities available for sale, amortized cost, due after one year through five years	50,972
Securities available for sale, fair value, due after one year through five years	51,415
Securities available for sale, amortized cost, due after five years through ten years	32,877
Securities available for sale, fair value, due after five years through ten years	33,809
Securities available for sale, amortized cost, due after ten years	25,772
Securities available for sale, fair value, due after ten years	27,021
Securities available for sale, amortized cost, single maturity	132,042
Securities available for sale, fair value, single maturity	134,561
Securities available for sale, amortized cost, Mortgage-backed securities and CMO	125,544
Securities available for sale, fair value, Mortgage-backed securities and CMO	124,884
Securities available for sale, fair value	259,445	$ 261,841
Debt Securities [Member]
Securities available for sale, amortized cost	257,586
Securities available for sale, fair value	$ 259,445

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Note 2 - Investment Securities - Investment Securities Available for Sale (Details) $ in Thousands	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Number of investment positions - less than twelve months	3	17
Fair value - less than twelve months	$ 3,792	$ 8,484
Gross unrealized losses - less than twelve months	$ 33	$ 27
Number of investment positions - more than twelve months	112	192
Fair value - more than twelve months	$ 130,426	$ 195,091
Gross unrealized losses - more than twelve months	$ 1,170	$ 5,431
Number of investment positions	115	209
Fair value	$ 134,218	$ 203,575
Gross unrealized losses	$ 1,203	$ 5,458
Agency Collateralized Mortgage Obligations [Member]
Number of investment positions - less than twelve months	3	4
Fair value - less than twelve months	$ 3,792	$ 2,870
Gross unrealized losses - less than twelve months	$ 33	$ 1
Number of investment positions - more than twelve months	20	24
Fair value - more than twelve months	$ 10,939	$ 12,168
Gross unrealized losses - more than twelve months	$ 134	$ 381
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Number of investment positions - less than twelve months		1
Fair value - less than twelve months		$ 1,563
Gross unrealized losses - less than twelve months		$ 13
Number of investment positions - more than twelve months	74	97
Fair value - more than twelve months	$ 72,485	$ 89,680
Gross unrealized losses - more than twelve months	$ 790	$ 3,476
US Government Agencies Debt Securities [Member]
Number of investment positions - less than twelve months		1
Fair value - less than twelve months		$ 499
Gross unrealized losses - less than twelve months		$ 1
Number of investment positions - more than twelve months	13	22
Fair value - more than twelve months	$ 45,138	$ 67,927
Gross unrealized losses - more than twelve months	$ 240	$ 1,015
US States and Political Subdivisions Debt Securities [Member]
Number of investment positions - less than twelve months		11
Fair value - less than twelve months		$ 3,552
Gross unrealized losses - less than twelve months		$ 12
Number of investment positions - more than twelve months	5	49
Fair value - more than twelve months	$ 1,864	$ 25,316
Gross unrealized losses - more than twelve months	$ 6	$ 559

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Note 3 - Loans and Allowance for Loan Losses (Details Textual)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Loans Charge-off Period			90 days
Performance Period			6 years
Collateral Dependent Loans, Value of Significant Properties	$ 200,000		$ 200,000
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate, Foreclosure			84,000		$ 33,000
Mortgage Loans in Process of Foreclosure, Amount	329,000		329,000		365,000
Impaired Financing Receivable, Interest Income, Cash Basis Method, Total	0	$ 0	0	$ 0
Financing Receivable, Troubled Debt Restructuring, Commitment to Lend	0		0		0
Financing Receivable, Modifications, Number of Contracts		0
Troubled Debt Restructuring, Principal Charge-offs		$ 0	$ 0
Troubled Debt Restructuring, Specific Allowance	$ 0	$ 0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0	0	0
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total	$ 503,000		$ 503,000		519,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Allowance for Loan Losses	0		0		0
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Provision for Loan Losses	$ 0	$ 0	$ 0	$ 2,000
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Modifications, Number of Contracts	2		2
Financing Receivable, Troubled Debt Restructuring	$ 436,000		$ 436,000
Commercial Portfolio Segment [Member]
Financing Receivable, Modifications, Number of Contracts				1
Financing Receivable, Troubled Debt Restructuring		$ 179,000		$ 179,000
Classified Loans [Member]
Allowance for Loan and Lease Losses, Period Increase (Decrease), Total			320,000		333,000
Overall Qualitative Factor [Member]
Allowance for Loan and Lease Losses, Period Increase (Decrease), Total			$ 3,300,000		$ 3,100,000
Bank Overdrafts [Member]
Loans Charge-off Period			45 days

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Note 3 - Loans and Allowance for Loan Losses - Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 484,053		$ 463,905
Less undisbursed portion of loans in process	(20,644)		(26,675)
Principal loan balance	463,409		437,230
Deferred loan origination fees, net	1,128		1,095
Allowance for loan losses	(4,609)	$ (4,339)	(4,065)	$ (3,867)	$ (3,631)	$ (3,634)
Loans, net	459,928		434,260
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	140,035		136,445
Allowance for loan losses	(754)	(727)	(693)	(688)	(301)	(219)
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Loans	22,584		22,607
Principal loan balance	22,584		22,607
Deferred loan origination fees, net	18		18
Allowance for loan losses	(170)	(164)	(162)	(148)	(156)	(133)
Real Estate Mortgage Portfolio Segment [Member] | Residential Construction [Member]
Loans	32,639		31,459
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Loans	111,862		107,445
Principal loan balance	111,862		107,445
Deferred loan origination fees, net	(44)		(38)
Allowance for loan losses	(1,452)	(1,391)	(1,401)	(1,306)	(1,520)	(1,622)
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Construction [Member]
Loans	20,797		20,591
Commercial Portfolio Segment [Member]
Loans	41,621		36,297
Principal loan balance	41,621		36,297
Deferred loan origination fees, net
Allowance for loan losses	(596)	(541)	(459)	(417)	(276)	(291)
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Loans	54,220		51,731
Principal loan balance	54,220		51,731
Deferred loan origination fees, net	1,043		1,025
Allowance for loan losses	(472)	(450)	(443)	(607)	(680)	(710)
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans	44,870		42,124
Consumer Portfolio Segment [Member] | Loans Secured by Deposits [Member]
Loans	1,354		1,399
Consumer Portfolio Segment [Member] | Unsecured Loan [Member]
Loans	3,598		3,638
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Loans	10,473		10,169
Allowance for loan losses	$ (849)	$ (775)	$ (683)	$ (485)	$ (407)	$ (414)

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Note 3 - Loans and Allowance for Loan Losses - Recorded Investments in Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Principal loan balance	$ 463,409	$ 437,230
Accrued interest receivable	1,614	1,530
Net deferred loan origination fees and costs	1,128	1,095
Recorded investment in loans	466,151	439,855
Individually evaluated for impairment	3,376	3,785
Collectively evaluated for impairment	462,449	435,740
Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	326	330
Real Estate Mortgage Portfolio Segment [Member] | Real Estate Loan [Member]
Principal loan balance	140,035	136,445
Accrued interest receivable	488	475
Net deferred loan origination fees and costs	118	99
Recorded investment in loans	140,641	137,019
Individually evaluated for impairment	1,870	2,184
Collectively evaluated for impairment	138,488	134,553
Real Estate Mortgage Portfolio Segment [Member] | Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	283	282
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Principal loan balance	22,584	22,607
Accrued interest receivable	97	119
Net deferred loan origination fees and costs	18	18
Recorded investment in loans	22,699	22,744
Individually evaluated for impairment	192	152
Collectively evaluated for impairment	22,507	22,592
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Principal loan balance	32,792	25,375
Accrued interest receivable	108	76
Net deferred loan origination fees and costs	(7)	(9)
Recorded investment in loans	32,893	25,442
Individually evaluated for impairment		521
Collectively evaluated for impairment	32,893	24,921
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Principal loan balance	111,862	107,445
Accrued interest receivable	264	265
Net deferred loan origination fees and costs	(44)	(38)
Recorded investment in loans	112,082	107,672
Individually evaluated for impairment	882	466
Collectively evaluated for impairment	111,157	107,158
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans	43	48
Commercial Portfolio Segment [Member]
Principal loan balance	41,621	36,297
Accrued interest receivable	137	120
Net deferred loan origination fees and costs
Recorded investment in loans	41,758	36,417
Individually evaluated for impairment	400	427
Collectively evaluated for impairment	41,358	35,990
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Principal loan balance	54,220	51,731
Accrued interest receivable	263	247
Net deferred loan origination fees and costs	1,043	1,025
Recorded investment in loans	55,526	53,003
Individually evaluated for impairment	28	35
Collectively evaluated for impairment	55,498	52,968
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Recorded investment in loans
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Principal loan balance	60,295	57,330
Accrued interest receivable	257	228
Net deferred loan origination fees and costs
Recorded investment in loans	60,552	57,558
Individually evaluated for impairment	4
Collectively evaluated for impairment	60,548	57,558
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
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		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Individually evaluated for impairment					$ 34	$ 48
Collectively evaluated for impairment					4,575	4,017
Allowance for loan losses	$ 4,609	$ 3,631	$ 4,609	$ 3,867	4,609	4,065
Beginning balance	4,339	3,631	4,065	3,634
Provision for loan losses	300	316	750	513
Charge-offs	(213)	(166)	(432)	(422)
Recoveries	183	86	226	142
Ending balance	4,609	3,867	4,609	3,867
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Individually evaluated for impairment					2	3
Collectively evaluated for impairment					752	690
Allowance for loan losses	754	301	754	688	754	693
Beginning balance	727	301	693	219
Provision for loan losses	4	398	75	538
Charge-offs	(92)	(15)	(130)	(75)
Recoveries	115	4	116	6
Ending balance	754	688	754	688
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Individually evaluated for impairment
Collectively evaluated for impairment					170	162
Allowance for loan losses	170	156	170	148	170	162
Beginning balance	164	156	162	133
Provision for loan losses	6	(8)	8	15
Charge-offs		0		0
Recoveries		0		0
Ending balance	170	148	170	148
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Individually evaluated for impairment
Collectively evaluated for impairment					316	224
Allowance for loan losses	316	291	316	216	316	224
Beginning balance	291	291	224	245
Provision for loan losses	25	(75)	92	(29)
Charge-offs		0		0
Recoveries		0		0
Ending balance	316	216	316	216
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Individually evaluated for impairment					32	44
Collectively evaluated for impairment					1,420	1,357
Allowance for loan losses	1,452	1,520	1,452	1,306	1,452	1,401
Beginning balance	1,391	1,520	1,401	1,622
Provision for loan losses	61	(237)	51	(348)
Charge-offs		0		0
Recoveries		23		32
Ending balance	1,452	1,306	1,452	1,306
Commercial Portfolio Segment [Member]
Individually evaluated for impairment						1
Collectively evaluated for impairment					596	458
Allowance for loan losses	596	276	596	417	596	459
Beginning balance	541	276	459	291
Provision for loan losses	55	141	137	126
Charge-offs		0		(1)
Recoveries		0		1
Ending balance	596	417	596	417
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Individually evaluated for impairment
Collectively evaluated for impairment					472	443
Allowance for loan losses	472	680	472	607	472	443
Beginning balance	450	680	443	710
Provision for loan losses	20	(75)	25	(109)
Charge-offs	(2)	(13)	(2)	(12)
Recoveries	4	15	6	18
Ending balance	472	607	472	607
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Individually evaluated for impairment
Collectively evaluated for impairment					849	683
Allowance for loan losses	849		849		849	683
Beginning balance			683
Ending balance	849		849
Consumer Portfolio Segment [Member] | Other Consumer Loan [Member]
Allowance for loan losses	775	407	849	485	$ 849	$ 683
Beginning balance	775	407	683	414
Provision for loan losses	129	172	362	320
Charge-offs	(119)	(138)	(300)	(334)
Recoveries	64	44	104	85
Ending balance	$ 849	$ 485	$ 849	$ 485

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Note 3 - Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Recorded investment with no allowance	$ 3,138		$ 3,138		$ 3,533
Unpaid principal balance with no allowance	3,471		3,471		3,838
Related allowance with no allowance
Average recorded investment with no allowance	3,360	$ 3,192	3,416	$ 3,182
Interest income recognized with no allowance		15		32
Interest income recognized	14	15	23	32
Recorded investment with allowance	238		238		252
Unpaid principal balance with allowance	252		252		258
Related allowance	34		34		48
Average recorded investment with allowance	304	302	287	286
Interest income recognized with allowance		0		0
Recorded investment	3,376		3,376		3,785
Unpaid principal balance	3,723		3,723		4,096
Related allowance	34		34		48
Average recorded investment	3,664	3,494	3,703	3,468
Unpaid principal balance with no allowance	3,471		3,471		3,838
Unpaid principal balance	3,723		3,723		4,096
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Recorded investment with no allowance	1,857		1,857		2,170
Unpaid principal balance with no allowance	2,120		2,120		2,409
Related allowance with no allowance
Average recorded investment with no allowance	2,025	2,327	2,073	2,449
Interest income recognized with no allowance	3	5	6	13
Interest income recognized	3	5	6	13
Recorded investment with allowance	13		13		14
Unpaid principal balance with allowance	14		14		15
Related allowance	2		2		3
Average recorded investment with allowance	75	267	55	248
Interest income recognized with allowance		0		0
Recorded investment	1,870		1,870		2,184
Unpaid principal balance	2,134		2,134		2,424
Related allowance	2		2		3
Average recorded investment	2,100	2,594	2,128	2,697
Unpaid principal balance with no allowance	2,120		2,120		2,409
Unpaid principal balance	2,134		2,134		2,424
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Recorded investment with no allowance	192		192		152
Unpaid principal balance with no allowance	194		194		153
Related allowance with no allowance
Average recorded investment with no allowance	191	214	178	142
Interest income recognized with no allowance		0		0
Interest income recognized		0		0
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance		0		0
Interest income recognized with allowance		0		0
Recorded investment	192		192		152
Unpaid principal balance	194		194		153
Related allowance
Average recorded investment	191	214	178	142
Unpaid principal balance with no allowance	194		194		153
Unpaid principal balance	194		194		153
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Recorded investment with no allowance					521
Unpaid principal balance with no allowance					521
Related allowance with no allowance
Average recorded investment with no allowance	263	0	349	0
Interest income recognized with no allowance		0		0
Interest income recognized		0		0
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance		0		0
Interest income recognized with allowance		0		0
Recorded investment					521
Unpaid principal balance					521
Related allowance
Average recorded investment	263	0	349	0
Unpaid principal balance with no allowance					521
Unpaid principal balance					521
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Recorded investment with no allowance	683		683		255
Unpaid principal balance with no allowance	692		692		260
Related allowance with no allowance
Average recorded investment with no allowance	467	312	396	342
Interest income recognized with no allowance	8	5	11	10
Interest income recognized	8	5	11	10
Recorded investment with allowance	199		199		211
Unpaid principal balance with allowance	208		208		213
Related allowance	32		32		44
Average recorded investment with allowance	203	0	135	0
Interest income recognized with allowance		0		0
Recorded investment	882		882		466
Unpaid principal balance	900		900		473
Related allowance	32		32		44
Average recorded investment	670	312	531	342
Unpaid principal balance with no allowance	692		692		260
Unpaid principal balance	900		900		473
Commercial Portfolio Segment [Member]
Recorded investment with no allowance	374		374		400
Unpaid principal balance with no allowance	427		427		451
Related allowance with no allowance
Average recorded investment with no allowance	385	254	390	173
Interest income recognized with no allowance	3	4	6	7
Interest income recognized	3	4	6	7
Recorded investment with allowance	26		26		27
Unpaid principal balance with allowance	30		30		30
Related allowance					1
Average recorded investment with allowance	26	28	88	29
Interest income recognized with allowance		0		0
Recorded investment	400		400		427
Unpaid principal balance	457		457		481
Related allowance					1
Average recorded investment	411	282	478	202
Unpaid principal balance with no allowance	427		427		451
Unpaid principal balance	457		457		481
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Recorded investment with no allowance	28		28		35
Unpaid principal balance with no allowance	38		38		44
Related allowance with no allowance
Average recorded investment with no allowance	27	77	29	71
Interest income recognized with no allowance		0		1
Interest income recognized		0		1
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance		7	9	9
Interest income recognized with allowance		0		0
Recorded investment	28		28		35
Unpaid principal balance	38		38		44
Related allowance
Average recorded investment	27	84	38	80
Unpaid principal balance with no allowance	38		38		44
Unpaid principal balance	38		38		44
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Recorded investment with no allowance	4		4
Unpaid principal balance with no allowance
Related allowance with no allowance
Average recorded investment with no allowance	2	8	1	5
Interest income recognized with no allowance		1		1
Interest income recognized		1		1
Recorded investment with allowance
Unpaid principal balance with allowance
Related allowance
Average recorded investment with allowance		0		0
Interest income recognized with allowance		0		0
Recorded investment	4		4
Unpaid principal balance
Related allowance
Average recorded investment	2	$ 8	1	$ 5
Unpaid principal balance with no allowance
Unpaid principal balance

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Note 3 - Loans and Allowance for Loan Losses - Recorded Investment in Nonperforming Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total Nonperforming Loans	$ 6,791	$ 6,911
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Total Nonperforming Loans	5,042	4,732
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Total Nonperforming Loans	423	438
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	346	450
Commercial Portfolio Segment [Member]
Total Nonperforming Loans	261	522
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Total Nonperforming Loans	316	226
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Total Nonperforming Loans	403	543
Nonperforming Financial Instruments [Member]
Nonaccrual Loans	2,482	3,055
Loans 90+ Days Past Due Still Accruing	81	2
Total Nonperforming Loans	2,563	3,057
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Nonaccrual Loans	1,713	1,769
Loans 90+ Days Past Due Still Accruing	76
Total Nonperforming Loans	1,789	1,769
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Nonaccrual Loans	192	152
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	192	152
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Nonaccrual Loans		521
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans		521
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Nonaccrual Loans	351	371
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	351	371
Nonperforming Financial Instruments [Member] | Commercial Portfolio Segment [Member]
Nonaccrual Loans	198	207
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	198	207
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Nonaccrual Loans	28	35
Loans 90+ Days Past Due Still Accruing
Total Nonperforming Loans	28	35
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Nonaccrual Loans
Loans 90+ Days Past Due Still Accruing	5	2
Total Nonperforming Loans	$ 5	$ 2

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Note 3 - Loans and Allowance for Loan Losses - Aging of Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Past Due	$ 6,791	$ 6,911
Current	459,034	432,614
Loans	466,151	439,855
Financial Asset Acquired with Credit Deterioration [Member]
Loans	326	330
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	5,042	4,732
Current	135,316	132,005
Loans	140,641	137,019
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans	283	282
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	423	438
Current	22,276	22,306
Loans	22,699	22,744
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	32,893	25,442
Loans	32,893	25,442
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	346	450
Current	111,693	107,174
Loans	112,082	107,672
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans	43	48
Commercial Portfolio Segment [Member]
Past Due	261	522
Current	41,497	35,895
Loans	41,758	36,417
Commercial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	316	226
Current	55,210	52,777
Loans	55,526	53,003
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Past Due	403	543
Current	60,149	57,015
Loans	60,552	57,558
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Financial Asset, 30 to 59 Days Past Due [Member]
Past Due	4,505	4,373
Financial Asset, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	3,254	2,617
Financial Asset, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	163	247
Financial Asset, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financial Asset, 30 to 59 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due	346	450
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due	63	377
Financial Asset, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	288	191
Financial Asset, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Past Due	391	491
Financial Asset, 60 to 89 Days Past Due [Member]
Past Due	786	1,015
Financial Asset, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	620	926
Financial Asset, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	104	39
Financial Asset, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financial Asset, 60 to 89 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due	55
Financial Asset, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due
Financial Asset, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Past Due	7	50
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past Due	1,500	1,523
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Past Due	1,168	1,189
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member]
Past Due	156	152
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member]
Past Due
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Past Due
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past Due	143	145
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Past Due	28	35
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Past Due	$ 5	$ 2

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Note 3 - Loans and Allowance for Loan Losses - Recorded Investment in Loans by Risk Category (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans	$ 466,151	$ 439,855
Pass [Member]
Loans	458,081	431,650
Special Mention [Member]
Loans	2,948	2,510
Substandard [Member]
Loans	2,567	2,569
Doubtful [Member]
Loans	2,555	3,126
Unlikely to be Collected Financing Receivable [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	140,641	137,019
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Pass [Member]
Loans	137,676	133,878
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Special Mention [Member]
Loans	48	133
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Substandard [Member]
Loans	1,131	1,168
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member] | Doubtful [Member]
Loans	1,786	1,840
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	22,699	22,744
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Pass [Member]
Loans	22,051	22,458
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Special Mention [Member]
Loans	330	65
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Substandard [Member]
Loans	126	69
Real Estate Mortgage Portfolio Segment [Member] | Land Loan [Member] | Doubtful [Member]
Loans	192	152
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	32,893	25,442
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Pass [Member]
Loans	32,698	24,921
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Special Mention [Member]
Loans	195
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Substandard [Member]
Loans
Real Estate Mortgage Portfolio Segment [Member] | Construction Loans [Member] | Doubtful [Member]
Loans		521
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	112,082	107,672
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Pass [Member]
Loans	109,023	104,843
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Special Mention [Member]
Loans	1,742	1,520
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Substandard [Member]
Loans	966	938
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Doubtful [Member]
Loans	351	371
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Commercial Portfolio Segment [Member]
Loans	41,758	36,417
Commercial Portfolio Segment [Member] | Pass [Member]
Loans	40,665	35,162
Commercial Portfolio Segment [Member] | Special Mention [Member]
Loans	633	763
Commercial Portfolio Segment [Member] | Substandard [Member]
Loans	262	285
Commercial Portfolio Segment [Member] | Doubtful [Member]
Loans	198	207
Commercial Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member]
Loans	55,526	53,003
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Pass [Member]
Loans	55,416	52,859
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	82	109
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Doubtful [Member]
Loans	28	35
Consumer Portfolio Segment [Member] | Home Equity and Second Mortgage [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member]
Loans	60,552	57,558
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Pass [Member]
Loans	60,552	57,529
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Special Mention [Member]
Loans		29
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Substandard [Member]
Loans
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Doubtful [Member]
Loans
Consumer Portfolio Segment [Member] | All Other Consumer Excluding Home Equity and Second Mortgage [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans

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Note 3 - Loans and Allowance for Loan Losses - Troubled Debt Restructuring by Accrual Status (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Recorded investment in loans	$ 466,151	$ 439,855
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Recorded investment in loans	140,641	137,019
Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
Recorded investment in loans	112,082	107,672
Commercial Portfolio Segment [Member]
Recorded investment in loans	41,758	36,417
Nonperforming Financial Instruments [Member]
TDR accruing	876	703
TDR nonaccrual	637	673
Recorded investment in loans	1,513	1,376
TDR related allowance for loan losses	32	44
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
TDR accruing	145	295
TDR nonaccrual	290	302
Recorded investment in loans	435	597
TDR related allowance for loan losses
Nonperforming Financial Instruments [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Real Estate Loan [Member]
TDR accruing	529	190
TDR nonaccrual	347	371
Recorded investment in loans	876	561
TDR related allowance for loan losses	32	44
Nonperforming Financial Instruments [Member] | Commercial Portfolio Segment [Member]
TDR accruing	202	218
TDR nonaccrual
Recorded investment in loans	202	218
TDR related allowance for loan losses

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Note 3 - Loans and Allowance for Loan Losses - Summary of PCI Loans (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Carrying amount	$ 326,000	$ 330,000
Allowance for loan losses	0	0
Carrying amount, net of allowance	326,000	330,000
Residential Mortgage Segment [Member] | Residential Loan [Member]
Carrying amount	283,000	282,000
Residential Mortgage Segment [Member] | Commercial Real Estate Loan [Member]
Carrying amount	$ 43,000	$ 48,000

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Note 3 - Loans and Allowance for Loan Losses - Accretable Yield, or Income Expected to be Collected (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance at beginning of period	$ 409	$ 459	$ 423	$ 470
New loans purchased
Accretion to income	(12)	(15)	(24)	(29)
Disposals and other adjustments
Reclassification (to) from nonaccretable difference	(7)	(1)	(9)	2
Balance at end of period	$ 390	$ 443	$ 390	$ 443

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Note 4 - Qualified Affordable Housing Project Investment (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Investment Amortization	$ 87,000	$ 82,000	$ 169,000	$ 164,000
Tax Credits and Other Tax Benefits	123,000	$ 98,000	248,000	$ 196,000
Other Assets [Member]
Investments, Total	3,400,000		3,400,000		$ 3,600,000
Other Liabilities [Member]
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments	$ 2,500,000		$ 2,500,000		$ 2,900,000

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Note 5 - Supplemental Disclosure for Earnings Per Share (Details Textual) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0	0	0

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Note 5 - Supplemental Disclosure for Earnings Per Share - Supplemental Disclosure for Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income attributable to First Capital, Inc.	$ 2,860	$ 2,100	$ 5,007	$ 4,233
Weighted average common shares outstanding (in shares)	3,329,837	3,326,797	3,329,840	3,326,632
Net income attributable to First Capital, Inc. per common share, basic (in dollars per share)	$ 0.86	$ 0.63	$ 1.50	$ 1.27
Weighted average common shares outstanding (in shares)	3,329,837	3,326,797	3,329,840	3,326,632
Add: Dilutive effect of restricted stock (in shares)	11,976	7,041	11,110	6,401
Weighted average common shares outstanding, as adjusted (in shares)	3,341,813	3,333,838	3,340,950	3,333,033
Net income attributable to First Capital, Inc. per common share, diluted (in dollars per share)	$ 0.86	$ 0.63	$ 1.50	$ 1.27

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Note 6 - Stock-based Compensation Plan (Details Textual) - USD ($)				3 Months Ended		6 Months Ended
	Feb. 19, 2019	Feb. 20, 2018	May 20, 2009	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	May 22, 2019	May 20, 2019
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period						9,750
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value						$ 52.09
Share-based Payment Arrangement, Expense				$ 62,000	$ 57,000	$ 118,000	$ 106,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total				$ 1,100,000		$ 1,100,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition						5 years
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	9,750	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	$ 52.09	$ 37.42
Stock Issued During Period, Value, Restricted Stock Award, Gross	$ 508,000	$ 748,000
Restricted Stock [Member] | Officers, Directors and Key Employees [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	20.00%
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] | 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									176,150
Equity Incentive Plan 2019 [Member]
Maximum Fair Value of First Exercisable Stock Incentive Options			$ 100,000
Equity Incentive Plan 2019 [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized								176,150
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant				176,150		176,150
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Equity Incentive Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						0

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Note 6 - Stock-based Compensation Plan - Summary of Nonvested Restricted Shares (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Nonvested, number of shares (in shares) | shares	24,900
Nonvested, weight average grant date fair value (in dollars per share) | $ / shares	$ 34.10
Granted, number of shares (in shares) | shares	9,750
Granted, weight average grant date fair value (in dollars per share) | $ / shares	$ 52.09
Vested, number of shares (in shares) | shares
Vested, weight average grant date fair value (in dollars per share) | $ / shares
Forfeited, number of shares (in shares) | shares
Forfeited, weight average grant date fair value (in dollars per share) | $ / shares
Nonvested, number of shares (in shares) | shares	34,650
Nonvested, weight average grant date fair value (in dollars per share) | $ / shares	$ 39.16

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Note 7 - Supplemental Disclosures of Cash Flow Information - Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash payments for:
Interest	$ 926	$ 731
Taxes (net of refunds received)	642	705
Noncash investing activities:
Transfers from loans to real estate acquired through foreclosure	$ 206	$ 176

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Note 8 - Fair Value Measurements (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financial and Nonfinancial Liabilities, Fair Value Disclosure	$ 0		$ 0		$ 0
Provision for Loan and Lease Losses, Total	300,000	$ 316,000	750,000	$ 513,000
Impaired Loan [Member]
Provision for Loan and Lease Losses, Total	8,000	72,000	12,000	137,000
Foreclosed Real Estate [Member]
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate, Write-down or Reserve, Amount	$ 217,000	$ 419,000	$ 354,000	$ 419,000
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Minimum [Member]
Fair Value Inputs, Estimated Selling Costs			11.00%		20.00%
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Maximum [Member]
Fair Value Inputs, Estimated Selling Costs			66.00%		62.00%
Fair Value, Inputs, Level 3 [Member] | Impaired Loan [Member] | Weighted Average [Member]
Fair Value Inputs, Estimated Selling Costs			38.00%		39.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Minimum [Member]
Fair Value Inputs, Estimated Selling Costs			22.00%		10.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Maximum [Member]
Fair Value Inputs, Estimated Selling Costs			73.00%		79.00%
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | Weighted Average [Member]
Fair Value Inputs, Estimated Selling Costs			24.00%		51.00%

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Note 8 - Fair Value Measurements - Assets Measured at Fair Value on Recurring and Nonrecurring Basis (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale	$ 259,445,000	$ 261,841,000
Equity securities	1,800,000	1,700,000
Other Consumer Loan [Member]
Impaired loans	4,000
Fair Value, Recurring [Member]
Securities available for sale	259,445,000	261,841,000
Equity securities	1,832,000	1,715,000
Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	84,658,000	91,257,000
Fair Value, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale	40,226,000	32,992,000
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale	64,459,000	74,504,000
Fair Value, Recurring [Member] | Municipal Notes [Member]
Securities available for sale	70,102,000	63,088,000
Fair Value, Nonrecurring [Member]
Impaired loans	3,342,000	3,737,000
Loans held for sale	3,962,000	2,849,000
Foreclosed real estate	2,909,000	3,142,000
Fair Value, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans	1,868,000	2,181,000
Foreclosed real estate	84,000	33,000
Fair Value, Nonrecurring [Member] | Land Segment [Member]
Impaired loans	192,000	152,000
Fair Value, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans	850,000	422,000
Foreclosed real estate	2,825,000	3,109,000
Fair Value, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans	400,000	426,000
Fair Value, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans	28,000	35,000
Fair Value, Nonrecurring [Member] | Residential Construction [Member]
Impaired loans		521,000
Fair Value, Inputs, Level 1 [Member] | Other Consumer Loan [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member]
Securities available for sale
Equity securities	1,832,000	1,715,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Municipal Notes [Member]
Securities available for sale
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans
Loans held for sale
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Land Segment [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member] | Residential Construction [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Other Consumer Loan [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member]
Securities available for sale	259,445,000	261,841,000
Equity securities
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	84,658,000	91,257,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale	40,226,000	32,992,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale	64,459,000	74,504,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Municipal Notes [Member]
Securities available for sale	70,102,000	63,088,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans
Loans held for sale	3,962,000	2,849,000
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Land Segment [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans
Foreclosed real estate
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member] | Residential Construction [Member]
Impaired loans
Fair Value, Inputs, Level 3 [Member] | Other Consumer Loan [Member]
Impaired loans	4,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]
Securities available for sale
Equity securities
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Agency Collateralized Mortgage Obligations [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Municipal Notes [Member]
Securities available for sale
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans	3,342,000	3,737,000
Loans held for sale
Foreclosed real estate	2,909,000	3,142,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Residential Mortgage Segment [Member]
Impaired loans	1,868,000	2,181,000
Foreclosed real estate	84,000	33,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Land Segment [Member]
Impaired loans	192,000	152,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Commercial Real Estate Segment [Member]
Impaired loans	850,000	422,000
Foreclosed real estate	2,825,000	3,109,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Commercial Business Segment [Member]
Impaired loans	400,000	426,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Home Equity and Second Mortgage [Member]
Impaired loans	$ 28,000	35,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member] | Residential Construction [Member]
Impaired loans		$ 521,000

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Note 8 - Fair Value Measurements - Carrying Value and Estimated Fair Value of Financial Instruments (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale	$ 259,445,000	$ 261,841,000
Equity Securities, FV-NI	1,800,000	1,700,000
Reported Value Measurement [Member]
Cash and cash equivalents	60,526,000	41,112,000
Interest-bearing time deposits	6,245,000	7,710,000
Securities available for sale	259,445,000	261,841,000
Loans held for sale	3,962,000	2,849,000
Loans, net	459,928,000	434,260,000
FHLB and other restricted stock	1,988,000	1,988,000
Accrued interest receivable	2,987,000	2,828,000
Equity Securities, FV-NI	1,832,000	1,715,000
Deposits	734,627,000	701,646,000
Accrued interest payable	172,000	150,000
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	60,526,000	41,112,000
Interest-bearing time deposits	6,340,000	7,650,000
Securities available for sale	259,445,000	261,841,000
Loans held for sale	4,033,000	2,900,000
Loans, net	472,960,000	427,200,000
Accrued interest receivable	2,987,000	2,828,000
Equity Securities, FV-NI	1,832,000	1,715,000
Deposits	733,775,000	699,864,000
Accrued interest payable	172,000	150,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	60,526,000	41,112,000
Interest-bearing time deposits
Securities available for sale
Loans held for sale
Loans, net
Accrued interest receivable
Equity Securities, FV-NI	1,832,000	1,715,000
Deposits
Accrued interest payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Interest-bearing time deposits	6,340,000	7,650,000
Securities available for sale	259,445,000	261,841,000
Loans held for sale	4,033,000	2,900,000
Loans, net
Accrued interest receivable	2,987,000	2,828,000
Equity Securities, FV-NI
Deposits
Accrued interest payable	172,000	150,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Interest-bearing time deposits
Securities available for sale
Loans held for sale
Loans, net	472,960,000	427,200,000
Accrued interest receivable
Equity Securities, FV-NI
Deposits	733,775,000	699,864,000
Accrued interest payable

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Note 9 - Revenue From Contracts With Customers - Noninterest Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Noninterest income, financial service	$ 1,424	$ 1,351	$ 2,664	$ 2,583
Net gains on loans and investments	246	194	438	435
Increase in cash value of life insurance	70	85	118	128
Other	28	106	53	116
Other noninterest income	344	385	609	679
Total noninterest income	1,768	1,736	3,273	3,262
Deposit Account [Member]
Noninterest income, financial service	516	545	977	1,054
ATM and Debit Card Fees [Member]
Noninterest income, financial service	729	643	1,376	1,243
Investment Advisory, Management and Administrative Service [Member]
Noninterest income, financial service	146	130	244	218
Product and Service, Other [Member]
Noninterest income, financial service	$ 33	$ 33	$ 67	$ 68

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Note 11 - Sale of Foreclosed Real Estate (Details Textual) $ in Thousands		6 Months Ended
	Jul. 19, 2019 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Real Estate Acquired Through Foreclosure		$ 2,909		$ 3,142
Proceeds from Sale of Foreclosed Assets		$ 77	$ 214
Commercial Real Estate Portfolio Segment [Member]
Number of Foreclosed Real Estate Properties		1
Real Estate Acquired Through Foreclosure		$ 2,800
Commercial Real Estate Portfolio Segment [Member] | Subsequent Event [Member]
Proceeds from Sale of Foreclosed Assets	$ 2,800