Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 1155

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 4
Chunk 1155
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.1 million with an average rate of 5.59% and average outstanding borrowings under the FRB’s BTFP of $8.6 million with an average rate of 5.05% during 2023. The Company’s total average outstanding balance of borrowings during 2023 was $14.7 million with an average rate of 5.27%.  There were no outstanding borrowed funds during 2022.  As a result of the changes in interest-earning assets and interest-bearing liabilities, the interest rate spread (tax equivalent basis) decreased from 2.90% for 2022 to 2.85% for 2023.  For further information, see “Average Balances and Yields” below.  The changes in interest income and interest expense resulting from changes in volume and changes in rates for 2023 and 2022 are shown in the schedule captioned “Rate/Volume Analysis” included herein.   

Provision for Loan Losses.  Effective January 1, 2023, the Company adopted the FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), as amended, and commonly referred to as the Current Expected Credit Loss model ("CECL"), 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 losses with the provision for credit losses on loans on the consolidated statements of income. Upon adoption, the Company recorded an increase in the beginning ACL on loans of $561,000, increasing the ACL on loans as a percentage of loans receivable to 1.29% as compared to 1.20% at December 31, 2022 prior to adoption.  In addition, the Company established an ACL related to unfunded loan commitments of $131,000 upon adoption of CECL. The use of the modified retrospective method of adoption resulted in the Company recording a $529,000 reduction (net of tax) in retained earnings as of January 1, 2023.

47

Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses increased from $950,000 for 2022 to $1.1 million for 2023 primarily due to loan growth and increased net charge-offs.  Total loans outstanding increased $57.7 million during 2023 in addition to the $75.3 increase in 2022.  The