Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 1244

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 4
Chunk 1244
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 Equity Securities.  Securities classified as available for sale and equity securities are reported at fair value on a recurring basis.  These securities are classified as Level 1 of the valuation hierarchy where quoted market prices from reputable third-party brokers are available in an active market.  If quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service.  These securities are reported using Level 2 inputs and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.  For securities where quoted market prices, market prices of similar securities or prices from an independent third party pricing service are not available, fair values are calculated using discounted cash flows or other market indicators and are classified within Level 3 of the fair value hierarchy.  Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.  Changes in fair value of equity securities are recorded in noninterest income on the consolidated statements of income.

Collateral Dependent Loans.  Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly.  In accordance with accounting standards, only collateral dependent loans for which a specific ACL has been established require classification in the fair value hierarchy.  The fair value of collateral dependent loans is classified as Level 3 in the fair value hierarchy. 

Collateral dependent loans with specific allocations of ACL are measured at the fair value of the collateral less estimated costs to sell. Collateral may be real estate and/or business assets, including equipment, inventory and/or accounts receivable.  The fair value of the collateral is generally determined based on real estate appraisals or other independent evaluations by qualified professionals, which are then discounted to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral. 

At December 31, 2024, the significant unobservable inputs used in the fair value measurement of collateral dependent loans included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral, and estimated costs to sell the collateral ranging from 10% to 20%, with a weighted average discount of 10.6%.  At December 31, 2023, the significant unobservable inputs used in the fair value measurement of collateral dependent loans included a