First Capital, Inc. (FCAP): A Beacon of Dividend Stability in Volatile Markets

In an era marked by economic uncertainty and market volatility, investors are increasingly drawn to companies that demonstrate financial discipline and resilience. Among them, First Capital, Inc. (NASDAQ:FCAP) stands out as a paragon of stability, particularly through its unwavering dividend policy. With a consistent $0.29 quarterly dividend since late 2024—unchanged even as global markets trembled—the company has positioned itself as a top-tier income investment for those seeking safety and predictability. This article explores how FCAP’s dividend strength, bolstered by its robust regional banking operations in Indiana and Kentucky, makes it a compelling choice for income-focused investors.

The Dividend: A Testament to Prudent Management

FCAP’s dividend history since 2020 reveals a commitment to shareholders unmatched by many peers. While the dividend remained at $0.27 per share through 2023, management delivered a 7.4% increase to $0.29 in September 2024, a move that underscored confidence in the bank’s financial health. Crucially, this increase has held firm in 2025 despite broader macroeconomic headwinds, including Federal Reserve rate cuts and inflationary pressures.

The dividend’s sustainability is rooted in strong earnings coverage. With a payout ratio of just 31% in 2025—well below the 55% historical average for the S&P 500—FCAP generates ample earnings to fund distributions. Projections for 3.6% EPS growth in 2025 further suggest this ratio will remain comfortably sustainable.

Regional Resilience: The Strength of Local Banking

FCAP’s 17 branches across Indiana and Kentucky are not just physical locations—they are hubs of community-driven finance. This geographic focus has insulated the bank from the systemic risks faced by larger institutions. Key metrics highlight its operational prowess:

1. Deposit Growth:
   Total deposits rose by $17.5 million in Q1 2025 to $1.08 billion, reflecting strong customer loyalty. The bank’s conservative loan-to-deposit ratio of 92% ensures ample liquidity, while public deposits (23% of total) provide a stable funding base.

2. Loan Portfolio Health:
   Average loans increased by $11.7 million in Q1 2025, driven by demand for commercial mortgages (+9%) and residential loans (+0.6%). Non-performing loans (NPLs) dropped to $4.1 million by March 2025, just 0.37% of total loans, a near-flawless credit profile.

3. Asset Quality:
   The allowance for credit losses covers 269.8% of NPLs, a cushion far exceeding regulatory requirements. This prudence, combined with a 3.34% net interest margin (up 20 bps year-over-year), reflects efficient pricing and cost management.

Why FCAP Outperforms in Volatile Markets

In an environment where uncertainty looms—think Fed rate cuts, inflation, and geopolitical risks—FCAP’s strengths align perfectly with income investors’ needs:

• Defensive Income Stream: The $0.29 dividend yields 3% at recent prices, competitive with 10-year Treasuries and far superior to cash.
• Local Market Dominance: Its Indiana/Kentucky footprint insulates it from national banking headwinds, as community ties foster steady deposit growth and low credit defaults.
• Capital Fortitude: Equity-to-assets ratio hit 10.85% in Q1 2025, while a $36.16 book value per share signals undervaluation relative to peers.

Risks and the Case for Immediate Action

No investment is without risk. FCAP faces challenges like rising noninterest expenses (up $424k in Q1 2025 due to weather-related costs) and macroeconomic slowdowns. However, its low leverage, diversified loan book, and track record of conservative lending mitigate these risks.

For income investors, the calculus is clear: FCAP offers a risk-adjusted yield with minimal exposure to systemic banking crises. With shares trading below estimated fair value and dividends firmly intact, now is the time to act.

Conclusion: A Rare Gem in the Income Landscape

In a world where volatility reigns, First Capital, Inc. delivers the rare combination of consistent dividends, regional resilience, and financial prudence. Its Indiana/Kentucky branches are not relics of the past but pillars of a thriving, community-focused banking model. For those seeking safety and income, FCAP is more than a stock—it’s a strategic anchor in turbulent times.

Invest now to secure a slice of this dividend stalwart’s future.