Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 9

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 9
---
’s employer or from the applicant’s tax returns.  In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken, generally by an independent appraiser approved by the Bank.  The mortgage loan documents used by the Bank conform to secondary market standards.

The Bank requires that borrowers obtain certain types of insurance to protect its interest in the collateral securing the loan.  The Bank requires either a title insurance policy insuring that the Bank has a valid first lien on the mortgaged real estate or an opinion by an attorney regarding the validity of title.  Fire and casualty insurance is also required on collateral for loans.

Loan Commitments and Letters of Credit.  The Bank issues commitments to originate fixed- and adjustable-rate single-family residential mortgage loans and commercial loans conditioned upon the occurrence of certain events.  Such commitments are made in writing on specified terms and conditions and are honored for up to 60 days from the date of application, depending on the type of transaction.  The Bank had outstanding loan commitments of approximately $16.5 million at December 31, 2024.

As an accommodation to its commercial business loan borrowers, the Bank issues standby letters of credit or performance bonds usually in favor of municipalities for whom its borrowers are performing services.  At December 31, 2024, the Bank had outstanding letters of credit of $2.1 million.

Loan Origination and Other Fees.  Loan fees and points are a percentage of the principal amount of the mortgage loan that is charged to the borrower for funding the loan.  The Bank usually charges a fixed origination fee on residential real estate loans and long-term commercial real estate loans.  Current accounting standards require loan origination fees and certain direct costs of underwriting and closing loans to be deferred and amortized into interest income over the contractual life of the loan.  Deferred fees and costs associated with loans that are sold are recognized as income at the time of sale.  The Bank had $1.1 million of net deferred loan costs at December 31, 2024.

Mortgage Banking Activities.  Mortgage loans originated and funded by the Bank and intended for sale in the secondary market are carried at the lower of aggregate cost or market value.  Aggregate market value is determined based on the quoted prices under a “best efforts” sales agreement with a third party.  Net unrealized losses are recognized through a valuation allowance by charges to income.  Realized gains on sales of mortgage loans are included in noninterest income.