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

March 31, 2020,

and the results of operations for the

three

months ended

March 31, 2020

and

2019

and the cash flows for the

three

months ended

March 31, 2020

and

2019.

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

-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, 2019

included in the Company’s Annual Report on Form

-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

effect on net income or stockholders’ equity.

COVID-

March 11, 2020,

the World Health Organization declared the outbreak of the novel coronavirus (“COVID-

19”

) as a global pandemic, which continues to spread throughout the United States and around the world. The COVID-

pandemic has adversely affected, and

may

continue to adversely affect economic activity globally, nationally and locally. COVID-

and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. Such events also

may

adversely affect business and consumer confidence, generally, and the Company and its customers, and their respective suppliers, vendors and processors,

may

be adversely affected.

Due to the COVID-

pandemic market interest rates have declined significantly, as the Federal Open Market Committee reduced the targeted federal funds interest rate range by

150

basis points during the month of

March 2020

0.25%.

These reductions in interest rates and other effects of the COVID-

pandemic

may

adversely affect the Company's financial condition and results of operations in future periods. It is unknown how long the adverse conditions associated with the COVID-

pandemic will last and what the financial impact will be to the Company. It is reasonably possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans.

March 22, 2020,

the federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”. This guidance encourages financial institutions to work prudently with borrowers that

may

be unable to meet their contractual obligations because of the effects of COVID-

19.

The guidance goes on to explain that in consultation with the Financial Accounting Standards Board (“FASB”) staff that the federal banking agencies concluded that short-term modifications (e.g.,

six

months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are

not

troubled debt restructurings (“TDRs”). The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was passed by Congress on

March 27, 2020.

The CARES Act also addressed COVID-

related modifications and specified that COVID-

related modifications on loans that were current as of

December 31, 2019

are

not

TDRs. The Bank has applied this guidance related to payment deferrals and other COVID-

related loan modifications made through

March 31, 2020,

and additional modifications are expected in the

second

quarter of

2020.

The CARES Act also included an allocation of

$349

billion for loans to be issued by financial institutions through the Small Business Administration (“SBA”). This program is known as the Paycheck Protection Program (“PPP”). PPP loans are forgivable, in whole or in part, if the proceeds are used for eligible payroll costs and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of

1.00%

and a term of

two

years, if

not

forgiven in whole or in part. Payments are deferred for the

first

six

months of the loan and the loans are

100%

guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from

5%,

based on the size of the loan. The SBA began accepting submissions for these PPP loans on

April 3, 2020

and the initial allocation of funds was exhausted on

April 16, 2020.

An additional

$310

billion was allocated to the PPP on

April 27, 2020.

Through

May 6, 2020,

the Bank had received SBA authorizations for PPP loans totaling approximately

$44.6

million. Participation in the PPP will likely have a positive impact on the Company’s financial position and results of operations as this fee income is recognized over the term of the PPP loans.