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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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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 September 30, 2003



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



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First Capital, Inc.

(Exact name of registrant as specified in its charter)



|Indiana                                                        |  | 35-2056949                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|220 Federal Drive NW, Corydon, Indiana   |  | 47112     
|---------------------------------------- |  | ----------
|(Address of principal executive offices) |  | (Zip Code)



Registrants
telephone number, including area code 1-812-738-2198



Not
applicable

Former name, former address and former fiscal year, if changed since last report



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Indicate by check mark whether the registrant (1) has filed all required 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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).  Yes ̈No  x



APPLICABLE ONLY TO CORPORATE ISSUERS; Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest practicable date: 2,825,944 shares of common stock were outstanding as of October 31, 2003.



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FIRST CAPITAL, INC.



INDEX



|           |  |                                                                                                                      |  | Page 
|---------- |  | -------------------------------------------------------------------------------------------------------------------- |  | -----
|           |  |                                                                                                                     
|Part I     |  | Financial Information                                                                                                |  |      
|           |  |                                                                                                                     
|           |  | Item 1. Consolidated Financial Statements                                                                            |  |      
|           |  |                                                                                                                     
|           |  | Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002 (unaudited)                               |  | 3    
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Income for the three months and nine months ended September 30, 2003 and 2002 (unaudited) |  | 4    
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 (unaudited)              |  | 5    
|           |  |                                                                                                                     
|           |  | Notes to consolidated financial statements (unaudited)                                                               |  | 6-9  
|           |  |                                                                                                                     
|           |  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 10-14
|           |  |                                                                                                                     
|           |  | Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 15-16
|           |  |                                                                                                                     
|           |  | Item 4. Controls and Procedures                                                                                      |  | 17   
|           |  |                                                                                                                     
|Part II    |  | Other Information                                                                                                    |  |      
|           |  |                                                                                                                     
|           |  | Item 1. Legal Proceedings                                                                                            |  | 18   
|           |  |                                                                                                                     
|           |  | Item 2. Changes in Securities and Use of Proceeds                                                                    |  | 18   
|           |  |                                                                                                                     
|           |  | Item 3. Defaults Upon Senior Securities                                                                              |  | 18   
|           |  |                                                                                                                     
|           |  | Item 4. Submission of Matters to a Vote of Security Holders                                                          |  | 18   
|           |  |                                                                                                                     
|           |  | Item 5. Other Information                                                                                            |  | 18   
|           |  |                                                                                                                     
|           |  | Item 6. Exhibits and Reports of Form 8-K                                                                             |  | 18-19
|           | 
|Signatures |  | 20                                                                                                                  



- 2 -



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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                                                                         |  | September 30,2003 |         |   | December 31,2002 |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | ---------------- | -
|                                                                                                                         |  | (In thousands)    |        
|ASSETS                                                                                                                   |  |                   |         |   |                  |  
|Cash and due from banks                                                                                                  |  | $                 | 7,092   |   |                  | $
|Interest bearing deposits with banks                                                                                     |  |                   | 6,620   |   |                  |  
|Securities available for sale, at fair value                                                                             |  |                   | 65,354  |   |                  |  
|Securities-held to maturity                                                                                              |  |                   | 1,522   |   |                  |  
|Loans receivable, net                                                                                                    |  |                   | 294,525 |   |                  |  
|Federal Home Loan Bank stock, at cost                                                                                    |  |                   | 3,056   |   |                  |  
|Foreclosed real estate                                                                                                   |  |                   | 260     |   |                  |  
|Premises and equipment                                                                                                   |  |                   | 10,293  |   |                  |  
|Accrued interest receivable:                                                                                             |  |                   |         |   |                  |  
|Loans                                                                                                                    |  |                   | 1,393   |   |                  |  
|Securities                                                                                                               |  |                   | 675     |   |                  |  
|Cash value of life insurance                                                                                             |  |                   | 1,307   |   |                  |  
|Goodwill                                                                                                                 |  |                   | 5,386   |   |                  |  
|Core deposit intangibles                                                                                                 |  |                   | 627     |   |                  |  
|Other assets                                                                                                             |  |                   | 902     |   |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|Total Assets                                                                                                             |  | $                 | 399,012 |   |                  | $
|                                                                                                                         |  |                   |         |   |                  |  
|LIABILITIES                                                                                                              |  |                   |         |   |                  |  
|Deposits:                                                                                                                |  |                   |         |   |                  |  
|Noninterest-bearing                                                                                                      |  | $                 | 26,627  |   |                  | $
|Interest-bearing                                                                                                         |  |                   | 273,019 |   |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|Total Deposits                                                                                                           |  |                   | 299,646 |   |                  |  
|Retail repurchase agreements                                                                                             |  |                   | 71      |   |                  |  
|Advances from Federal Home Loan Bank                                                                                     |  |                   | 53,341  |   |                  |  
|Accrued interest payable                                                                                                 |  |                   | 1,172   |   |                  |  
|Accrued expenses and other liabilities                                                                                   |  |                   | 1,372   |   |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|Total Liabilities                                                                                                        |  |                   | 355,602 |   |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|STOCKHOLDERS 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 5,000,000 shares; issued 2,843,839 shares (2,551,763 shares in
2002) |  |                   | 28      |   |                  |  
|Additional paid-in capital                                                                                               |  |                   | 19,202  |   |                  |  
|Retained earnings-substantially restricted                                                                               |  |                   | 24,578  |   |                  |  
|Unearned ESOP shares                                                                                                     |  |                   | (410    | ) |                  |  
|Unearned stock compensation                                                                                              |  |                   | (90     | ) |                  |  
|Accumulated other comprehensive income                                                                                   |  |                   | 379     |   |                  |  
|Less treasury stock, at cost - 16,695 shares (8,980 shares in 2002)                                                      |  |                   | (277    | ) |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|Total Stockholders Equity                                                                                               |  |                   | 43,410  |   |                  |  
|                                                                                                                         |  |                   |         |   |                  |  
|Total Liabilities and Stockholders Equity                                                                               |  | $                 | 399,012 |   |                  | $
|                                                                                                                         |  |                   |         |   |                  |  



See
accompanying notes to consolidated financial statements.



- 3 -



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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                    |  | Three Months EndedSeptember 30,       |       | Nine Months EndedSeptember 30,
|--------------------------------------------------- |  | ------------------------------------- | ----- | ------------------------------
|                                                    |  | 2003                                  |       |                               
|                                                    |  | (In thousands, except per share data)
|INTEREST INCOME                                     |  |                                       |       |                               
|Loans receivable, including fees                    |  | $                                     | 4,746 |                               
|Securities                                          |  |                                       |       |                               
|Taxable                                             |  |                                       | 548   |                               
|Tax-exempt                                          |  |                                       | 141   |                               
|Federal Home Loan Bank dividends                    |  |                                       | 37    |                               
|Interest bearing deposits with banks                |  |                                       | 34    |                               
|                                                    |  |                                       |       |                               
|Total interest income                               |  |                                       | 5,506 |                               
|INTEREST EXPENSE                                    |  |                                       |       |                               
|Deposits                                            |  |                                       | 1,460 |                               
|Retail repurchase agreements                        |  |                                       |      |                               
|Advances from Federal Home Loan Bank                |  |                                       | 729   |                               
|                                                    |  |                                       |       |                               
|Total interest expense                              |  |                                       | 2,189 |                               
|Net interest income                                 |  |                                       | 3,317 |                               
|Provision for loan losses                           |  |                                       | 275   |                               
|                                                    |  |                                       |       |                               
|Net interest income after provision for loan losses |  |                                       | 3,042 |                               
|NON-INTEREST INCOME                                 |  |                                       |       |                               
|Service charges on deposit accounts                 |  |                                       | 471   |                               
|Commission income                                   |  |                                       | 63    |                               
|Gain on sale of securities                          |  |                                       |      |                               
|Mortgage brokerage fees                             |  |                                       | 38    |                               
|Other income                                        |  |                                       | 13    |                               
|                                                    |  |                                       |       |                               
|Total non-interest income                           |  |                                       | 585   |                               
|                                                    |  |                                       |       |                               
|NON-INTEREST EXPENSE                                |  |                                       |       |                               
|Compensation and benefits                           |  |                                       | 1,224 |                               
|Occupancy                                           |  |                                       | 279   |                               
|Data processing                                     |  |                                       | 190   |                               
|Other operating expenses                            |  |                                       | 564   |                               
|                                                    |  |                                       |       |                               
|Total non-interest expense                          |  |                                       | 2,257 |                               
|                                                    |  |                                       |       |                               
|Income before income taxes                          |  |                                       | 1,370 |                               
|Income tax expense                                  |  |                                       | 484   |                               
|                                                    |  |                                       |       |                               
|Net Income                                          |  | $                                     | 886   |                               
|OTHER COMPREHENSIVE INCOME, NET OF TAX              |  |                                       |       |                               
|Unrealized gain on securities:                      |  |                                       |       |                               
|Unrealized holding gains arising during the period  |  |                                       | (674  | )                             
|Less: reclassification adjustment                   |  |                                       |      |                               
|                                                    |  |                                       |       |                               
|Other comprehensive income                          |  |                                       | (674  | )                             
|                                                    |  |                                       |       |                               
|Comprehensive Income                                |  | $                                     | 212   |                               
|                                                    |  |                                       |       |                               
|Net income per common share, basic                  |  | $                                     | 0.32  |                               
|                                                    |  |                                       |       |                               
|Net income per common share, diluted                |  | $                                     | 0.32  |                               
|                                                    |  |                                       |       |                               



See
accompanying notes to consolidated financial statements.



- 4 -



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PART I - FINANCIAL INFORMATION

FIRST CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  | Nine Months EndedSeptember 30, |        
|--------------------------------------------------------------------------------- |  | ------------------------------ | -------
|                                                                                  |  | 2003                           |        
|                                                                                  |  | (In thousands)                 |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                                |        
|Net income                                                                        |  | $                              | 2,607  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |        
|Amortization of premiums and accretion of discounts                               |  |                                | 310    
|Depreciation and amortization expense                                             |  |                                | 516    
|Deferred income taxes                                                             |  |                                | 321    
|ESOP compensation expense                                                         |  |                                | 64     
|Stock compensation expense                                                        |  |                                | 53     
|Increase in cash value of life insurance                                          |  |                                | (40    
|Provision for loan losses                                                         |  |                                | 600    
|Net gain on sale of securities available for sale                                 |  |                                | (51    
|Stock dividends on Federal Home Loan Bank stock                                   |  |                                | (76    
|Decrease accrued interest receivable                                              |  |                                | 56     
|Decrease in accrued interest payable                                              |  |                                | (184   
|Net change in other assets/liabilities                                            |  |                                | 273    
|                                                                                  |  |                                |        
|Net Cash Provided By Operating Activities                                         |  |                                | 4,449  
|                                                                                  |  |                                |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                                |        
|Net decrease in interest bearing deposits with banks                              |  |                                | 17,583 
|Purchase of securities available for sale                                         |  |                                | (26,077
|Proceeds from maturities of securities available for sale                         |  |                                | 17,000 
|Purchase of securities held to maturity                                           |  |                                |       
|Proceeds from maturities of securities held to maturity                           |  |                                | 118    
|Proceeds from sale of securities available for sale                               |  |                                | 2,551  
|Principal collected on mortgage-backed securities                                 |  |                                | 9,280  
|Net increase in loans receivable                                                  |  |                                | (14,906
|Purchase of Federal Home Loan Bank stock                                          |  |                                | (64    
|Proceeds from sale of Federal Reserve Bank stock                                  |  |                                | 180    
|Proceeds from sale of foreclosed real estate                                      |  |                                |       
|Purchase of premises and equipment                                                |  |                                | (1,120 
|Net cash paid in acquisition of Hometown Bancshares, Inc.                         |  |                                | (5,726 
|                                                                                  |  |                                |        
|Net Cash Used By Investing Activities                                             |  |                                | (1,181 
|                                                                                  |  |                                |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                                |        
|Net increase (decrease) in deposits                                               |  |                                | (1,229 
|Net increase in advances from Federal Home Loan Bank                              |  |                                | 21     
|Net decrease in retail repurchase agreements                                      |  |                                | (386   
|Exercise of stock options                                                         |  |                                | 71     
|Purchase of treasury stock                                                        |  |                                | (160   
|Dividends paid                                                                    |  |                                | (1,103 
|                                                                                  |  |                                |        
|Net Cash Provided (Used) By Financing Activities                                  |  |                                | (2,786 
|                                                                                  |  |                                |        
|Net Increase (Decrease) in Cash and Due From Banks                                |  |                                | 482    
|Cash and due from banks at beginning of period                                    |  |                                | 6,610  
|                                                                                  |  |                                |        
|Cash and Due From Banks at End of Period                                          |  | $                              | 7,092  
|                                                                                  |  |                                |        



See
accompanying notes to consolidated financial statements.



- 5 -



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FIRST CAPITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Presentation of Interim Information
|-- | -----------------------------------



First Capital, Inc. (Company) is the holding company for First Harrison Bank (Bank). The information presented in this report
relates primarily to the Banks operations.



In the
opinion of management, the unaudited consolidated financial statements include all normal adjustments considered necessary to present fairly the financial position as of September 30, 2003, and the results of operations for the three months and nine
months ended September 30, 2003 and 2002 and cash flows for the nine months ended September 30, 2003 and 2002. 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.



The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with generally accepted accounting principles 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, 2002 included in the Form 10-KSB.



The unaudited consolidated financial statements include the accounts of the Company, the Bank and the Banks wholly owned subsidiary, First Harrison Financial Services, Inc. All material intercompany balances and transactions have been
eliminated in consolidation.



|2. | Comprehensive Income
|-- | --------------------



Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income for the Company includes net income and other comprehensive
income representing the net unrealized gains and losses on securities available for sale. The following tables set forth the components of other comprehensive income and the allocated tax amounts for the three and nine months ended September 30,
2003 and 2002:



|                                                                   |  | Three MonthsEndedSeptember 30, |        |   | Nine MonthsEndedSeptember 30, |  
|------------------------------------------------------------------ |  | ------------------------------ | ------ | - | ----------------------------- | -
|                                                                   |  | 2003                           |        |   | 2002                          |  
|                                                                   |  | (In thousands)                 |       
|Unrealized gains (losses) on securities:                           |  |                                |        |   |                               |  
|Unrealized holding gains (losses) arising during the period        |  | $                              | (1,116 | ) |                               | $
|Income tax (expense) benefit                                       |  |                                | 442    |   |                               |  
|                                                                   |  |                                |        |   |                               |  
|Net of tax amount                                                  |  |                                | (674   | ) |                               |  
|                                                                   |  |                                |        |   |                               |  
|Less: reclassification adjustment for gains included in net income |  |                                |       |   |                               |  
|Income tax benefit                                                 |  |                                |       |   |                               |  
|                                                                   |  |                                |        |   |                               |  
|Other comprehensive income (loss)                                  |  | $                              | (674   | ) |                               | $
|                                                                   |  |                                |        |   |                               |  



- 6 -



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FIRST CAPITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|3. | Merger with Hometown Bancshares, Inc.
|-- | -------------------------------------



On March 20, 2003, the Company consummated its acquisition of Hometown Bancshares, Inc. (Hometown), a bank holding company located in New
Albany, Indiana, pursuant to an Agreement and Plan of Merger dated September 25, 2002. Hometown is the parent company of Hometown National Bank, which was merged with and into the Bank. The acquisition was made for the purpose of expanding the
Companys presence in the New Albany and Floyd County, Indiana market area and the Company expects to benefit from growth in this market area as well as from expansion of the banking services provided to the existing customers of Hometown.



Pursuant to the terms of the merger
agreement, Hometown stockholders who elected to receive Company stock received 2.487 shares of Company common stock and Hometown shareholders who elected to receive cash received $46.50 in cash for each share of Hometown common stock. Hometown
stockholders who did not submit properly completed election forms within the required timeframe received 0.773 shares of Company common stock and $32.05 in cash for each share of Hometown common stock. The Company issued 285,446 shares of common
stock and paid approximately $5.4 million in cash consideration to former Hometown stockholders. The value assigned to the common shares issued in the transaction was approximately $6.1 million determined by the average closing price of the
Companys common stock over a twenty day period ended March 17, 2003. The transaction was accounted for under the purchase method of accounting. Accordingly, the results of operations of Hometown have been included in the Companys results
of operations since the date of acquisition. Under the purchase method of accounting, the purchase price is allocated to the respective assets acquired and liabilities assumed based on their estimated fair values, net of applicable income tax
effects. The excess of cost over the fair value of the net assets acquired of approximately $5.4 million has been recorded as goodwill.



The following unaudited pro forma information assumes that the acquisition was consummated on January 1, 2002:



|                                                    |  | Three MonthsEndedSeptember 30,        |       | Nine MonthsEndedSeptember 30,
|--------------------------------------------------- |  | ------------------------------------- | ----- | -----------------------------
|                                                    |  | 2003                                  |       | 2002                         
|                                                    |  | (In thousands, except per share data)
|Interest income                                     |  | $                                     | 5,506 |                              
|Interest expense                                    |  |                                       | 2,331 |                              
|                                                    |  |                                       |       |                              
|Net interest income                                 |  |                                       | 3,175 |                              
|Provision for loan losses                           |  |                                       | 275   |                              
|                                                    |  |                                       |       |                              
|Net interest income after provision for loan losses |  |                                       | 2,900 |                              
|                                                    |  |                                       |       |                              
|Noninterest income                                  |  |                                       | 585   |                              
|Noninterest expense                                 |  |                                       | 2,257 |                              
|                                                    |  |                                       |       |                              
|Income before income taxes                          |  |                                       | 1,228 |                              
|Income tax expense                                  |  |                                       | 428   |                              
|                                                    |  |                                       |       |                              
|Net income                                          |  | $                                     | 800   |                              
|                                                    |  |                                       |       |                              
|Net income per common share, basic                  |  | $                                     | 0.26  |                              
|Net income per common share, diluted                |  | $                                     | 0.26  |                              



- 7 -



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FIRST CAPITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|3. | Merger with Hometown Bancshares, Inc. - continued
|-- | -------------------------------------------------



In addition to combining the historical results of operations, the pro forma calculations consider the purchase accounting adjustments and
nonrecurring charges directly related to the acquisition and the related tax effects. The pro forma calculations do not include any anticipated cost savings as a result of the acquisition. The pro forma results of operations are not necessarily
indicative of the actual results of operations that would have occurred had the Hometown acquisition actually been consummated on January 1, 2002, or results that may occur in the future.



|4. | Supplemental Disclosure for Earnings Per Share
|-- | ----------------------------------------------



|                                                        |  | Three months endedSeptember 30,               |           | Nine months endedSeptember 30,
|------------------------------------------------------- |  | --------------------------------------------- | --------- | ------------------------------
|                                                        |  | 2003                                          |           | 2002                          
|                                                        |  | (Dollars in thousands, except per share data)
|Basic:                                                  |  |                                               |           |                               
|Earnings:                                               |  |                                               |           |                               
|Net income                                              |  | $                                             | 886       |                               
|Shares:                                                 |  |                                               |           |                               
|Weighted average common shares outstanding              |  |                                               | 2,772,387 |                               
|Net income per common share, basic                      |  | $                                             | 0.32      |                               
|Diluted:                                                |  |                                               |           |                               
|Earnings:                                               |  | $                                             | 886       |                               
|Shares:                                                 |  |                                               |           |                               
|Weighted average common shares outstanding              |  |                                               | 2,772,387 |                               
|Add: Dilutive effect of outstanding options             |  |                                               | 29,402    |                               
|Add: Dilutive effect of restricted stock                |  |                                               | 4,425     |                               
|Weighted average common shares outstanding, as adjusted |  |                                               | 2,806,214 |                               
|Net income per common share, diluted                    |  | $                                             | 0.32      |                               



|5. | Stock Option Plan
|-- | -----------------



The Company accounts for its stock option plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the stock option plan had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation.



- 8 -



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FIRST CAPITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|5. | Stock Option Plan  continued
|-- | -----------------------------



|                                                                                                                                            |  | Three MonthsEndedSeptember 30,        |      |   | Nine MonthsEndedSeptember 30, |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ---- | - | ----------------------------- | -
|                                                                                                                                            |  | 2003                                  |      |   | 2002                          |  
|                                                                                                                                            |  | (In thousands, except per share data) |     
|Net income, as reported                                                                                                                     |  | $                                     | 886  |   |                               | $
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                                       | (3   | ) |                               |  
|                                                                                                                                            |  |                                       |      |   |                               |  
|Pro forma net income                                                                                                                        |  | $                                     | 883  |   |                               | $
|                                                                                                                                            |  |                                       |      |   |                               |  
|Earnings per share:                                                                                                                         |  |                                       |      |   |                               |  
|Basic - as reported                                                                                                                         |  | $                                     | 0.32 |   |                               | $
|Basic - pro forma                                                                                                                           |  | $                                     | 0.32 |   |                               | $
|Diluted - as reported                                                                                                                       |  | $                                     | 0.32 |   |                               | $
|Diluted - pro forma                                                                                                                         |  | $                                     | 0.32 |   |                               | $



|6. | Supplemental Disclosures of Cash Flow Information
|-- | -------------------------------------------------



|                                                                 |  | Nine Months EndedSeptember 30,
|---------------------------------------------------------------- |  | ------------------------------
|                                                                 |  | 2003                          
|                                                                 |  | (In thousands)                
|Cash payments for:                                               |  |                               
|Interest                                                         |  | $                             
|Taxes                                                            |  |                               
|Noncash investing activities:                                    |  |                               
|Transfers from loans to real estate acquired through foreclosure |  |                               
|Acquisition of Hometown Bancshares, Inc. (Note 3)                |  |                               
|Assets acquired:                                                 |  |                               
|Cash and due from banks                                          |  | $                             
|Interest-bearing deposits with banks                             |  |                               
|Investment securities                                            |  |                               
|Loans, net                                                       |  |                               
|Premises and equipment                                           |  |                               
|Goodwill                                                         |  |                               
|Core deposit intangible                                          |  |                               
|Other assets                                                     |  |                               
|                                                                 |  |                               
|                                                                 |  |                               
|                                                                 |  |                               
|Liabilities assumed:                                             |  |                               
|Deposit accounts                                                 |  |                               
|Other liabilities                                                |  |                               
|                                                                 |  |                               
|                                                                 |  |                               
|                                                                 |  |                               
|Net assets acquired                                              |  | $                             
|                                                                 |  |                               
|Cash paid                                                        |  | $                             
|Stock issued                                                     |  |                               
|                                                                 |  |                               
|Total purchase price                                             |  | $                             
|                                                                 |  |                               



- 9 -



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PART I - ITEM 2



MANAGEMENTS DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL,
INC. AND SUBSIDIARIES



Safe Harbor Statement for Forward Looking
Statements



This report may contain forward-looking statements within the
meaning of the federal securities laws. These statements are not historical facts, rather statements based on the Companys current expectations regarding its business strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as expects, believes, anticipates, intends and similar expressions.



Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the
Companys actual results, performance and achievements to be 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; legislative and regulatory changes; and other factors disclosed periodically in the Companys filings with
the Securities and Exchange Commission.



Because of the risks and uncertainties
inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as required by applicable law or
regulation, the Company assumes no obligation to update any forward-looking statements.



Financial Condition



Total assets increased
from $308.6 million at December 31, 2002 to $399.0 million at September 30, 2003. The increase in total assets includes the assets acquired in the merger with Hometown, which had assets of $90.5 million, excluding goodwill and other purchase
accounting adjustments.



Net loans receivable were $216.0
million at December 31, 2002, compared to $294.5 million at September 30, 2003. The Hometown acquisition added $64.3 million in net loans, primarily in commercial mortgages and commercial loans. Since the March acquisition, net loans receivable have
increased $13.9 million, with over half of the growth in residential mortgages.



Securities available for sale increased $374,000 from December 31, 2002 to September 30, 2003. Securities purchased during the period totaled $26.1 million in addition to the $4.3 million acquired from Hometown. The
purchases were primarily government agencies, mortgage-backed securities and, to a lesser extent, municipal obligations. During the same period, the available-for-sale portfolio had maturities of $17.0 million, principal repayments of $9.2 million
and sales of $2.6 million.



Cash and short-term investments
increased from $12.7 million at December 31, 2002 to $13.7 million at September 30, 2003. Hometown had $18.1 million in cash and short-term investments at the date of the acquisition. Cash consideration of $5.4 million was paid to Hometown
shareholders in connection with the merger. The majority of the remainder of cash and short-term investments was used to fund the previously mentioned loan growth and investment purchases.



- 10 -



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PART I - ITEM 2



MANAGEMENTS DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC. AND SUBSIDIARIES



Total deposits increased from $216.2 million at December 31, 2002 to $299.6 million at September 30, 2003. Hometown had deposits of $84.7 million at the
date of the acquisition, including time deposits of $63.3 million and checking and savings deposits of $21.4 million.



Federal Home Loan Bank borrowings have not changed and totaled $53.3 million at both December 31, 2002 and September 30, 2003. New advances of $4.6
million have been drawn during the nine month period, primarily to take advantage of lower interest rates at favorable terms and to replace maturing advances of $4.6 million.



Total stockholders equity increased from $36.3 million at December 31, 2002 to $43.4 million at September 30, 2003 primarily
as a result of the issuance of common stock of $6.1 million related to the Hometown acquisition and retained net income of $1.5 million offset by a $592,000 reduction in the unrealized gain on securities.



Results of Operations



Net Income for the nine month periods ended September 30, 2003 and 2002.Net income was $2.6 million ($.96 per share
diluted) for the nine months ended September 30, 2003 compared to $2.4 million ($.96 per share diluted) for the nine months ended September 30, 2002. Increases in interest and noninterest income were partially offset by increases in noninterest
expenses and the provision for loan losses.



Net Income for
the three month periods ended September 30, 2003 and 2002.Net income was $886,000 ($.32 per share diluted) for the three months ended September 30, 2003 compared to $829,000 ($.33 per share diluted) for the same period in 2002. Again, increases
in interest and noninterest income were partially offset by increases in noninterest expenses and the provision for loan losses.



Net interest income for the nine month periods ended September 30, 2003 and 2002.Net interest income increased 25.0% from $7.5 million in 2002 to
$9.4 million in 2003 primarily as a result of an increase in interest-earning assets through the Hometown acquisition and internal growth.



Total interest income increased $1.7 million during the nine months ended September 30, 2003 compared to the same period in 2002. The average balance of
interest-earning assets increased from $276.6 million to $348.0 million when comparing the same periods. The average tax-equivalent yield on these assets declined from 6.92% in 2002 to 6.16% in 2003, primarily due to the continued refinancing of
residential mortgages and the repricing of the investment portfolio and adjustable rate loans at lower interest rates.



Total interest expense decreased $184,000 when comparing the nine months ended September 30, 2003 to the nine months ended September 30, 2002. Interest on
deposits decreased $389,000 which was partially offset by a $205,000 increase in interest on borrowed funds when comparing the two periods. The average rate on interest-bearing liabilities decreased from 3.78% in 2002 to 2.87% in 2003, resulting in
an increase in the Banks interest rate spread to 3.29% during the first nine months of 2003 from 3.14% during the same period of 2002.



- 11 -



---

PART I - ITEM 2



MANAGEMENTS DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC. AND SUBSIDIARIES



Net interest income for the three month periods ended September 30, 2003 and 2002.Net interest income increased from $2.5 million for the three
months ended September 30, 2002 to $3.3 million for the same period in 2003 primarily due to increases in interest-earning assets and the interest rate spread.



Total interest income increased $738,000 for the three months ended September 30, 2003 compared to the three months ended September 30, 2002. The
increase in the average balance of interest-earning assets to $372.0 million from $282.8 million more than offset the reduction in corresponding tax-equivalent yield on those assets to 6.00% in 2003 from 6.84% in 2002.



Total interest expense decreased $45,000 during the three months ended
September 30, 2003 compared to the same period in 2002. The average cost of interest-bearing liabilities decreased from 3.71% in 2002 to 2.70% in 2003, resulting in the Banks interest rate spread increasing from 3.13% to 3.30% during the same
time frames.



Provision for loan losses. The provision
for loan losses was $600,000 for the nine month period ended September 30, 2003 compared to $155,000 for the same period in 2002. During 2003, gross loans receivable increased $79.9 million. The acquisition of Hometown accounted for $65.4 million of
that increase. The allowance for loan losses related to the acquired loans amounted to $1.1 million as of the acquisition date. However, the consistent application of managements allowance methodology resulted in an increase in the provision
for loan losses due to the higher levels of nonperforming loans as compared to the prior year and the general weakening of economic conditions.



Provisions for loan losses are charges to earnings to maintain the total allowance for loan losses at a level considered reasonable by management to
provide for probable known and inherent loan losses based on managements evaluation of the collectibility 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 effect the loss rates.



- 12 -



---

PART I - ITEM 2



MANAGEMENTS DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC. AND SUBSIDIARIES



The allowance for loan losses was $2.5 million at September 30, 2003 compared to $1.2 million at December 31, 2002. As previously discussed,
Hometowns allowance for loan losses was $1.1 million at the date of acquisition. Management has deemed these amounts as adequate on those dates based on its best estimate of probable known and inherent loan losses. At September 30, 2003,
nonperforming loans amounted to $4.9 million compared to $1.3 million at December 31, 2002. Loans acquired in the Hometown acquisition accounted for $3.0 million of the $4.9 million. Included in nonperforming loans at September 30, 2003 are loans
secured by residential mortgages of $1.4 million, nonresidential mortgages and land loans of $933,000, commercial business loans of $514,000 and consumer loans of $120,000. These loans are still accruing interest as the collateral and collection
efforts are deemed sufficient to ensure full recovery. Also included in nonperforming loans at September 30, 2003 are nonaccrual loans totaling $2.0 million consisting of residential mortgages of $680,000, nonresidential mortgages of $981,000,
commercial business loans of $325,000 and consumer loans of $53,000.



Noninterest income for the nine month periods ended September 30, 2003 and 2002. Noninterest income increased 33.7% to $1.7 million for the nine months ended September 30, 2003 compared to $1.3 million for the nine months ended
September 30, 2002. Service charges on deposits increased $306,000, primarily due to a 35% increase in the number of savings and checking accounts from September 30, 2002 to September 30, 2003. The Bank also recognized gains of $51,000 on the sale
of securities during the first quarter of 2003. The Bank had a large amount of securities due to mature in the same time frame so a portion of these securities were sold to reduce the interest rate risk. No securities were sold during the same
period in 2002.



Noninterest income for the three month
periods ended September 30, 2003 and 2002.Noninterest income increased 31.8% to $585,000 for the three months ended September 30, 2003 compared to $444,000 for the same period in 2002. Increases of $116,000 in service charges on deposits and
$38,000 in mortgage brokerage fees contributed to the income growth.



Noninterest expense for the nine month periods ended September 30, 2003 and 2002. Noninterest expense increased by $1.5 million, or 31.6%, for the nine month period ended September 30, 2003 compared to the nine months ended September
30, 2002. Increases in compensation and benefits, occupancy and data processing fees and other operating expenses fueled this increase.



Compensation and benefits increased by $786,000 when making comparisons between the first nine months of 2003 and 2002. The primary factor behind this
increase is the addition of staff due to the Hometown acquisition and the opening of the new Jeffersonville, Indiana branch office in May of 2003. The Bank had an increase in staff of 35% when comparing September 2002 to September 2003.



Other operating expenses increased $383,000 when comparing the two periods
primarily due to $145,000 increase in advertising expenses as the bank heavily marketed the new areas of operation. Data processing fees and occupancy expenses have increased $200,000 and $177,000, respectively. Both of these increases are primarily
related to the addition of three new offices. The data processing increase also reflects the expenses associated with converting the Hometown accounts to the Banks computer system.



- 13 -



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PART I - ITEM 2



MANAGEMENTS DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FIRST CAPITAL, INC. AND SUBSIDIARIES



Noninterest expense for the three month periods ended September 30, 2003 and 2002. Noninterest expense increased 38.6% to $2.3 million for the
quarter ended September 30, 2003 compared to $1.6 million for the same period in 2002. Costs associated with compensation and benefits due to the addition of staff were the primary factor, increasing by $331,000 when comparing the two periods. Other
operating expenses accounted for $153,000 of the increase, with advertising expenses increasing $29,000 and consulting fees $21,000.



Income tax expense. Income tax expense for the nine month period ended September 30, 2003 was $1.4 million, compared to $1.3 million for the same
period in 2002. The effective tax rate decreased from 35.1% in 2002 to 34.8% in 2003. Income tax expense for the three month period ended September 30, 2003 was $484,000, compared to $456,000 for the same quarter in 2002. The effective tax rate for
the three month period in 2003 was 35.3%, compared to 35.5% in 2002.



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 September 30, 2003, the Bank had cash and interest-bearing deposits with banks of $13.7 million and securities available-for-sale with a fair value of $65.4
million. If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB of Indianapolis and collateral eligible for repurchase agreements.



The Banks primary investing activity is the origination of one-to-four
family mortgage loans and, to a lesser extent, consumer, multi-family, commercial real estate 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 Bank is required to
maintain specific amounts of capital pursuant to Office of Thrift Supervision requirements. As of September 30, 2003, the Bank was in compliance with all regulatory capital requirements, which were effective as of such date with tangible, core and
risk-based capital ratios of 9.2%, 9.2% and 15.1%, respectively. The regulatory requirements at that date were 1.5%, 3.0% and 8.0%, respectively.



- 14 -



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PART I  ITEM 3



QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC. AND SUBSIDIARIES



Qualitative Aspects of Market Risk. The Banks principal financial objective is to achieve long-term profitability while reducing its exposure
to fluctuating market interest rates. The Bank 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 Bank 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 Bank for its portfolio. The Bank 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 Bank does not maintain a trading account for any class of financial
instrument nor does the Bank engage in hedging activities or purchase high-risk derivative instruments. Furthermore, the Bank is not subject to foreign currency exchange rate risk or commodity price risk.



The Bank uses interest rate sensitivity analysis to measure its interest rate
risk by computing changes in NPV (net portfolio value) of its cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. NPV represents the market value of portfolio equity
and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market risk sensitive instruments in the event of a sudden and sustained
100 to 300 basis point increase or decrease in market interest rates with no effect given to any steps that management might take to counter the effect of that interest rate movement. Using data compiled by the OTS, the Bank receives a report that
measures interest rate risk by modeling the change in NPV (net portfolio value) over a variety of interest rate scenarios. This procedure for measuring interest rate risk was developed by the OTS to replace the gap analysis (the
difference between interest-earning assets and interest-bearing liabilities that mature or reprice within a specific time period).



The following tables are provided by the OTS and set forth the change in the Banks NPV at December 31, 2002 and June 30, 2003, based on OTS
assumptions that would occur in the event of an immediate change in interest rates, with no effect given to any steps that management might take to counteract that change. Due to the level of market interest rates over these time periods, the tables
provide information for only a sustained 100 basis point decrease in market interest rates. Given the timing of the release of this information by the OTS, information as of September 30, 2003, is unavailable for inclusion in this report.



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PART I  ITEM 3



QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

FIRST CAPITAL, INC. AND SUBSIDIARIES



|                       |  | At December 31, 2002 |       
|---------------------- |  | -------------------- | ------
|                       |  | Net Portfolio Value  |       
|ChangeIn Rates         |  | DollarAmount         |       
|(Dollars in thousands) | 
|300bp                  |  | $                    | 32,637
|200bp                  |  |                      | 36,565
|100bp                  |  |                      | 39,685
|bp                    |  |                      | 40,269
|(100)bp                |  |                      | 38,533
|                       | 
|                       |  | At June 30, 2003     |       
|                       |  | Net Portfolio Value  |       
|ChangeIn Rates         |  | DollarAmount         |       
|(Dollars in thousands) | 
|300bp                  |  | $                    | 34,677
|200bp                  |  |                      | 38,371
|100bp                  |  |                      | 41,077
|bp                    |  |                      | 41,655
|(100)bp                |  |                      | 39,232



The preceding tables
indicate that in the event of a sudden and sustained increase or decrease in prevailing market interest rates, the Banks NPV would be expected to decrease. The expected decrease in the Banks NPV is primarily attributable to the
relatively high percentage of fixed-rate loans in the Banks loan portfolio. At September 30, 2003, approximately 73% of the loan portfolio consisted of fixed-rate loans.



Certain assumptions utilized by the OTS in assessing the interest rate risk of savings associations within its region were
utilized in preparing the preceding table. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios, among others.



As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. 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 calculating the table.



- 16 -



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PART I - ITEM 4



CONTROLS AND
PROCEDURES

FIRST CAPITAL, INC. AND SUBSIDIARIES



The Companys management, including the Companys principal executive officer and principal financial officer,
have 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 Securities and Exchange Commission (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. In addition, based on that evaluation, no change in the Companys internal control over financial reporting occurred during the quarter ended September 30, 2003 that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.



- 17 -



---

PART II

OTHER INFORMATION

FIRST CAPITAL, INC.



|Item 1. |  | Legal Proceedings
|------- |  | -----------------



The Company is not a party to any legal proceedings. Periodically, there have been various claims and lawsuits involving the Bank, mainly as a plaintiff,
such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Banks business. The Bank is
not a party to any pending legal proceedings that it believes would have a material adverse affect on its financial condition or operations.



|Item 2. |  | Changes in Securities and Use of Proceeds
|------- |  | -----------------------------------------



Not applicable.



|Item 3. |  | Defaults upon Senior Securities
|------- |  | -------------------------------



Not applicable.



|Item 4. |  | Submission of Matters to a Vote of Security Holders
|------- |  | ---------------------------------------------------



Not applicable.



|Item 5. |  | Other Information
|------- |  | -----------------



Not applicable.



|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



|(a) | Exhibits
|--- | --------



|     | 
|---- | 
|3.1  | 
|     | 
|3.2  | 
|     | 
|11.0 | 
|     | 
|31.1 | 
|     | 
|31.2 | 
|     | 
|32.1 | 
|     | 
|32.2 | 



- 18 -



---

PART II

OTHER INFORMATION

FIRST CAPITAL, INC.



|Item 6. |  | Exhibits and Reports on Form 8-K  continued
|------- |  | --------------------------------------------



|(b) | Reports on Form 8-K
|--- | -------------------



On July 17, 2003, the Company filed Form 8-K to announce the earnings for the quarter ended June 30, 2003.



- 19 -



---

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 November 13, 2003 |  |  |  | BY:                             
|                        |  |  |  |                                 
|                        |  |  |  |                                 



|                        |  |  | 
|----------------------- |  |  | 
|Dated November 13, 2003 |  |  | 
|                        |  |  | 
|                        |  |  | 



- 20 -