A community bank in Indiana reported higher profits for the second quarter of 2026 by earning more on loans and investments while keeping its funding costs in check. First Capital, Inc. (NASDAQ: FCAP), the Corydon-based holding company for First Harrison Bank, posted net income of $4.8 million, or $1.43 per diluted share, for the quarter ended June 30, 2026, up from $3.8 million, or $1.13 per diluted share, in the same period of 2025. The improvement was driven by a wider net interest margin, the percentage gap between what a bank earns on its assets and what it pays on deposits and borrowings, which expanded from 3.59 percent to 3.98 percent year over year.
Where the extra income came from
The average yield on First Capital's interest-earning assets rose from 4.82 percent in the second quarter of 2025 to 5.12 percent in 2026, while the average balance of those assets grew from $1.18 billion to $1.24 billion. On the other side, the average cost of interest-bearing liabilities dropped from 1.64 percent to 1.56 percent, even as that liability balance expanded from $883.8 million to $907.3 million. Higher income and lower cost on a larger asset base: that combination produced a $1.6 million increase in net interest income after the provision for credit losses for the quarter.
Noninterest income added $187,000 compared with the prior-year quarter. The largest single contributor was a $92,000 gain on equity securities in 2026, reversing a $41,000 loss in the same quarter of 2025. Service charges on deposit accounts contributed an additional $54,000.
What the bank spent more on
Noninterest expenses rose $359,000 in the quarter. Compensation and benefits accounted for $235,000 of that, driven by annual salary adjustments, performance-related pay, and higher health insurance costs. Advertising spending increased $84,000, which First Capital attributed to new marketing campaigns. General inflationary pressures lifted other expenses by $79,000. A $75,000 reduction in professional services partially offset those increases.
Income tax expense climbed as well. The effective tax rate moved from 18.4 percent in the second quarter of 2025 to 20.8 percent in 2026, because a higher share of net income became subject to taxation.
First half of 2026
For the six months ended June 30, 2026, First Capital reported net income of $9.1 million, or $2.72 per diluted share, compared with $7.0 million, or $2.09 per diluted share, in the first half of 2025. The tax-equivalent net interest margin for the period reached 3.90 percent, up from 3.47 percent. Management sold $18.7 million of available-for-sale securities during the period to reposition the portfolio for higher future yields, recording a $92,000 loss on those sales.
Net charge-offs, the portion of loans written off as uncollectable after recoveries are applied, fell to $169,000 in the first half of 2026 from $197,000 in the same stretch of 2025, even as the provision for credit losses rose from $644,000 to $775,000.