Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 467

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 13
Chunk 467
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INUED

(1 - continued)

Use of Estimates – continued

While management uses available information to recognize losses on loans and foreclosed real estate, further reductions in the carrying amounts of loans and foreclosed real estate may be necessary based on changes in local economic conditions.  In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans and foreclosed real estate.  Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.  Because of these factors, it is reasonably possible that the estimated losses on loans and foreclosed real estate may change materially in the near term.  However, the amount of the change that is reasonably possible cannot be estimated.

Debt Securities

Available for Sale Debt Securities: Available for sale debt securities consist primarily of mortgage-backed and other debt securities and are stated at fair value.  The Company holds mortgage-backed securities and other debt securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), and the Federal Home Loan Bank (“FHLB”), government-sponsored enterprises (collectively referred to as government agencies), as well as collateralized mortgage obligations (“CMOs”) and other mortgage-backed securities.  Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by the issuers of the securities.  CMOs are complex mortgage-backed securities that restructure the cash flows and risks of the underlying mortgage collateral.  The Company also holds debt securities issued by the U.S. Treasury and municipalities and political subdivisions of state and local governments. 

Amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity, adjusted for anticipated prepayments. Premiums on callable debt securities are amortized to their earliest call date.  Unrealized gains and losses, net of tax, on available for sale debt securities are included in other comprehensive income and the accumulated unrealized holding gains and losses are reported as a separate component of equity until realized.  Realized gains and losses on the sale of available for sale debt securities are determined using the specific identification method and are included in other noninterest income and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income.

For available for sale debt securities in an unrealized loss position, the Company