FIRST CAPITAL INC Income Taxes Disclosure

The Company and its corporate subsidiaries file consolidated tax returns.  For the year ended December 31, 2025 the Company’s pretax income from continuing operations was $19.9 million and originated entirely from domestic sources.  The Company has no foreign operations and pays no foreign taxes.

The components of consolidated income tax expense for the years ended December 31, 2025, 2024 and 2023 are presented in the following table.  The Company prospectively adopted ASU 2023-09 and as such, current and deferred components of income tax expense in prior years are not required to be disclosed by jurisdiction.

​

​

The reconciliation of income tax expense for the year ended December 31, 2025 follows:

​

​

The state and local income tax category is driven entirely by Indiana and Kentucky, which together represent all of the total state and local effect for 2025.  The concentration reflects statutory rate differences and apportionment, net of the federal benefit.

The reconciliation of income tax expense with the amount which would have been provided at the federal statutory rate of 21% for the years ended December 31, 2024, and 2023 follows:

​

​

Income taxes paid (net of refunds received) were as follows for the year ended December 31, 2025:

​

​

Significant components of the deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:

​

​

At December 31, 2025, the Company had Federal tax credit carryforwards of $1.1 million, that expire at various dates from 2044 to 2047 if unused.

At December 31, 2025 and 2024, the Company had Indiana tax credit carryforwards of $158,000 and $305,000, respectively, that may be carried forward nine years and expire in 2032 if unused.

At December 31, 2025 and 2024, the Company had no liability for unrecognized income tax benefits related to uncertain tax positions and does not anticipate any increase in the liability for unrecognized tax benefits during the next twelve months. The Company believes that its income tax positions would be sustained upon examination and does not anticipate any adjustments that would result in a material change to its financial position or results of operations. The Company files consolidated U.S. federal income tax returns and Indiana and Kentucky state income tax returns. Returns filed in these jurisdictions for tax years ended on or after December 31, 2022 are subject to examination by the relevant taxing authorities. Each entity included in the consolidated federal, Indiana and Kentucky state income tax returns filed by the Company are charged or given credit for the applicable tax as though separate returns were filed.

Retained earnings of the Bank at December 31, 2025 and 2024 include approximately $909,000 for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of such allocated amounts for purposes other than tax bad debt losses, including redemption of bank stock, excess dividends or loss of “bank” status, would create income for tax purposes only, subject to the then-current corporate income tax rate. The unrecorded deferred liability on these amounts was approximately $191,000 at December 31, 2025 and 2024.