Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 1197

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 4
Chunk 1197
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 and is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Expected utilization rates based on Regulatory Credit Conversion Factors are compared to the current funded portion of the total commitment amount as a practical expedient for funded exposure at default.

Loan Charge-Offs

For portfolio segments other than consumer loans, the Company’s practice is to charge-off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons.  A partial charge-off is recorded on a loan when the uncollectibility of a portion of the loan has been confirmed, such as when a loan is discharged in bankruptcy, the collateral is liquidated, a loan is restructured at a reduced principal balance, or other identifiable events that lead management to determine the full principal balance of the loan will not be repaid.  A specific reserve is recognized as a component of the ACL on loans individually evaluated for credit losses.  Partial charge-offs are included in the Company’s historical loss experience used to estimate the collective (pooled) component of the ACL on loans.  Specific reserves are not considered charge-offs in management’s analysis of the ACL on loans because they are estimates and the outcome of the loan relationship is undetermined.

F-15

FIRST CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(1 - continued)

Loans and ACL – continued

Consumer loans not secured by real estate are typically charged off at 90 days past due, or earlier if deemed uncollectible, unless the loans are in the process of collection.  Overdrafts are charged off after 45 days past due.  Charge-offs are typically recorded on loans secured by real estate when the property is foreclosed upon.

Loans Held for Sale

Mortgage loans originated 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 determined using the specific identification method and are included in