Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 12

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 12
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 properties when a loan is individually evaluated for credit losses, and a property is considered significant if the value of the property is estimated to exceed $200,000.  Subsequent appraisals are obtained as needed or if management believes there has been a significant change in the market value of the property.  In instances where it is not deemed necessary to obtain a new appraisal, management bases its evaluation and ACL on loans analysis on the original appraisal with adjustments for current conditions based on management’s assessment of market factors and management’s inspection of the property.  At December 31, 2024, discounts from appraised values used in management’s analysis for estimates of changes in market conditions and the condition of the collateral ranged from 10% to 20%, with a weighted average discount of 11%. 

An insured institution is required to establish and maintain an ACL on loans at a level that is adequate to absorb estimated credit losses associated with the loan portfolio, including binding commitments to lend.  When an insured institution classifies problem assets as “loss,” it is required either to establish an ACL equal to 100% of the amount of the assets, or charge off the classified asset.  The amount of its valuation allowance is subject to review by the banking regulators, which can order the establishment of additional loss allowances.  The Bank regularly reviews the loan portfolio to determine whether any loans require classification in accordance with applicable regulations.

8

Foreclosed Real Estate.  Foreclosed real estate held for sale is carried at fair value minus estimated costs to sell.  Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized.  Valuations are periodically performed by management and an allowance is established by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell.  The net income or loss from operations of foreclosed real estate held for sale is reported in noninterest expense.  At December 31, 2024, the Bank had no foreclosed real estate.  See Note 6 in the accompanying Notes to Consolidated Financial Statements for additional information regarding foreclosed real estate.

ACL on Loans.  Effective January 1, 2023, the Company adopted FASB ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), as amended, under the modified retrospective method. The adoption replaced the allowance for loan losses with the ACL on loans on the consolidated balance sheets and replaced the related provision for loan