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Investments | 12 Months Ended
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Dec. 31, 2011
Investment (Tables) |
Investment [Text Block] | 2) Investments The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2011 are summarized as follows:
|  |  |  |  | Gross |  |  | Gross |  |  | Estimated |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
December 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity |  |  |  |  |  |  |  |  |  |  |  |
carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |  |  |
and obligations of U.S |  |  |  |  |  |  |  |  |  |  |  |
Government agencies |  | $ | 2,820,159 |  |  | $ | 551,740 |  |  | $ | - |  |  | $ | 3,371,899 |
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 3,024,425 |  |  |  | 309,986 |  |  |  | (13,156 | ) |  |  | 3,321,255 |
Corporate securities including |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
public utilities |  |  | 113,648,447 |  |  |  | 10,075,071 |  |  |  | (2,268,146 | ) |  |  | 121,455,372 |
Mortgage-backed securities |  |  | 6,575,178 |  |  |  | 354,286 |  |  |  | (356,900 | ) |  |  | 6,572,564 |
Redeemable preferred stock |  |  | 1,510,878 |  |  |  | 72,639 |  |  |  | (129,200 | ) |  |  | 1,454,317 |
Total fixed maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
securities held to maturity |  | $ | 127,579,087 |  |  | $ | 11,363,722 |  |  | $ | (2,767,402 | ) |  | $ | 136,175,407 |
|  |  |  |  | Gross |  |  | Gross |  |  | Estimated |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
December 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |
Equity securities available for sale |  |  |  |  |  |  |  |  |  |  |  |
at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |
Non-redeemable preferred stock |  | $ | 20,281 |  |  | $ | - |  |  | $ | (1,843 | ) |  | $ | 18,438 |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  |  | 7,250,991 |  |  |  | 363,387 |  |  |  | (1,333,424 | ) |  |  | 6,280,954 |
Total equity securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
at estimated fair value |  | $ | 7,271,272 |  |  | $ | 363,387 |  |  | $ | (1,335,267 | ) |  | $ | 6,299,392 |
Total securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
carried at estimated fair value |  | $ | 7,271,272 |  |  | $ | 363,387 |  |  | $ | (1,335,267 | ) |  | $ | 6,299,392 |
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 54,344,327 |  |  |  |  |  |  |  |  |  |  |  |  |
Residential construction |  |  | 17,259,666 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 48,433,147 |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for loan losses |  |  | (4,881,173 | ) |  |  |  |  |  |  |  |  |  |  |  |
Total mortgage loans on real estate and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
construction loans held for investment |  | $ | 115,155,967 |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ | 3,786,780 |  |  |  |  |  |  |  |  |  |  |  |  |
Other real estate owned held for investment - net of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
depreciation |  |  | 46,398,095 |  |  |  |  |  |  |  |  |  |  |  |  |
Other real estate owned held for sale |  |  | 5,793,900 |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate |  | $ | 55,978,775 |  |  |  |  |  |  |  |  |  |  |  |  |
Policy, student and other loans at |  |  |  |  |  |  |  |  |  |  |  |  |
amortized cost - net of allowance for doubtful accounts |  | $ | 18,463,277 |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term investments at amortized cost |  | $ | 6,932,023 |  |  |  |  |  |  |  |  |  |  |  |  |
The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2010 are summarized as follows:
|  |  |  |  | Gross |  |  | Gross |  |  | Estimated |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity |  |  |  |  |  |  |  |  |  |  |  |
carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |  |  |
and obligations of U.S |  |  |  |  |  |  |  |  |  |  |  |
Government agencies |  | $ | 2,855,303 |  |  | $ | 325,935 |  |  | $ | - |  |  | $ | 3,181,238 |
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 1,773,904 |  |  |  | 122,565 |  |  |  | (18,574 | ) |  |  | 1,877,895 |
Corporate securities including |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
public utilities |  |  | 85,354,245 |  |  |  | 6,626,582 |  |  |  | (716,007 | ) |  |  | 91,264,820 |
Mortgage-backed securities |  |  | 6,469,942 |  |  |  | 239,719 |  |  |  | (654,959 | ) |  |  | 6,054,702 |
Redeemable preferred stock |  |  | 1,594,622 |  |  |  | 27,158 |  |  |  | (32,171 | ) |  |  | 1,589,609 |
Total fixed maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
securities held to maturity |  | $ | 98,048,016 |  |  | $ | 7,341,959 |  |  | $ | (1,421,711 | ) |  | $ | 103,968,264 |
|  |  |  |  | Gross |  |  | Gross |  |  | Estimated |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |
Equity securities available for sale |  |  |  |  |  |  |  |  |  |  |  |
at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |
Non-redeemable preferred stock |  | $ | 20,282 |  |  | $ | - |  |  | $ | (4,224 | ) |  | $ | 16,058 |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  |  | 6,418,151 |  |  |  | 707,798 |  |  |  | (357,364 | ) |  |  | 6,768,585 |
Total equity securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
at estimated fair value |  | $ | 6,438,433 |  |  | $ | 707,798 |  |  | $ | (361,588 | ) |  | $ | 6,784,643 |
Total securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
carried at estimated fair value |  | $ | 6,438,433 |  |  | $ | 707,798 |  |  | $ | (361,588 | ) |  | $ | 6,784,643 |
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 60,285,273 |  |  |  |  |  |  |  |  |  |  |  |  |
Residential construction |  |  | 18,436,495 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 24,502,781 |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for loan losses |  |  | (7,070,442 | ) |  |  |  |  |  |  |  |  |  |  |  |
Total mortgage loans on real estate and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
construction loans held for investment |  | $ | 96,154,107 |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ | 3,996,777 |  |  |  |  |  |  |  |  |  |  |  |  |
Other real estate owned held for investment - net of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
depreciation |  |  | 44,422,829 |  |  |  |  |  |  |  |  |  |  |  |  |
Other real estate owned held for sale |  |  | 5,086,400 |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate |  | $ | 53,506,006 |  |  |  |  |  |  |  |  |  |  |  |  |
Policy, student and other loans at |  |  |  |  |  |  |  |  |  |  |  |  |
amortized cost - net of allowance for doubtful accounts |  | $ | 17,044,897 |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term investments at amortized cost |  | $ | 2,618,349 |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Maturity Securities The following tables summarize unrealized losses on fixed maturities securities, which are carried at amortized cost, at December 31, 2011 and 2010. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related fixed maturity securities:
|  | Unrealized Losses for Less than Twelve Months |  |  | No. of Investment Positions |  |  | Unrealized Losses for More than Twelve Months |  |  | No. of Investment Positions |  |  | Total Unrealized Loss |
At December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Redeemable Preferred Stock |  | $ | 800 |  |  |  | 1 |  |  | $ | 128,400 |  |  |  | 1 |  |  | $ | 129,200 |
Obligations of States and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Political Subdivisions |  |  | - |  |  |  | 0 |  |  |  | 13,156 |  |  |  | 2 |  |  | $ | 13,156 |
Corporate Securities |  |  | 1,544,224 |  |  |  | 47 |  |  |  | 723,922 |  |  |  | 12 |  |  | $ | 2,268,146 |
Mortgage and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
asset-backed securities |  |  | 161,300 |  |  |  | 3 |  |  |  | 195,599 |  |  |  | 1 |  |  |  | 356,899 |
Total unrealized losses |  | $ | 1,706,324 |  |  |  | 51 |  |  | $ | 1,061,077 |  |  |  | 16 |  |  | $ | 2,767,401 |
Fair Value |  | $ | 24,249,533 |  |  |  |  |  |  | $ | 3,762,892 |  |  |  |  |  |  | $ | 28,012,425 |
At December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Redeemable Preferred Stock |  | $ | 4,022 |  |  |  | 4 |  |  | $ | 28,149 |  |  |  | 1 |  |  | $ | 32,171 |
Obligations of States and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Political Subdivisions |  |  | - |  |  |  | 0 |  |  |  | 18,574 |  |  |  | 3 |  |  |  | 18,574 |
Corporate Securities |  |  | 70,934 |  |  |  | 10 |  |  |  | 645,073 |  |  |  | 25 |  |  |  | 716,007 |
Mortgage and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
asset-backed securities |  |  | 8,971 |  |  |  | 2 |  |  |  | 645,988 |  |  |  | 3 |  |  |  | 654,959 |
Total unrealized losses |  | $ | 83,927 |  |  |  | 16 |  |  | $ | 1,337,784 |  |  |  | 32 |  |  | $ | 1,421,711 |
Fair Value |  | $ | 4,527,041 |  |  |  |  |  |  | $ | 10,037,150 |  |  |  |  |  |  | $ | 14,564,191 |
As of December 31, 2011, the average market value of the related fixed maturities was 91.0% of amortized cost and the average market value was 91.1% of amortized cost as of December 31, 2010. During 2011, 2010 and 2009, an other than temporary decline in market value resulted in the recognition of credit losses on fixed maturity securities of $125,129, $150,059 and $326,000, respectively. On a quarterly basis, the Company reviews its available for sale fixed investment securities related to corporate securities and other public utilities, consisting of bonds and preferred stocks that are in a loss position. The review involves an analysis of the securities in relation to historical values, and projected earnings and revenue growth rates. Based on the analysis, a determination is made whether a security will likely recover from the loss position within a reasonable period of time. If it is unlikely that the investment will recover from the loss position, the loss is considered to be other-than-temporary, the security is written down to the impaired value and an impairment loss is recognized. No other than temporary impairment loss was considered to exist for these fixed maturities as of December 31, 2011. Equity Securities The following tables summarize unrealized losses on equity securities that were carried at estimated fair value based on quoted trading prices at December 31, 2011 and 2010. The unrealized losses were primarily the result of decreases in market value due to overall equity market declines. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related equity securities available for sale in a loss position:
|  | Unrealized Losses for Less than Twelve Months |  |  | No. of Investment Positions |  |  | Unrealized Losses for More than Twelve Months |  |  | No. of Investment Positions |  |  | Total Unrealized Losses |
At December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-redeemable preferred stock |  | $ | - |  |  |  | - |  |  | $ | 1,843 |  |  |  | 2 |  |  | $ | 1,843 |
Industrial, miscellaneous and all other |  |  | 955,400 |  |  |  | 79 |  |  |  | 378,024 |  |  |  | 14 |  |  |  | 1,333,424 |
Total unrealized losses |  | $ | 955,400 |  |  |  | 79 |  |  | $ | 379,867 |  |  |  | 16 |  |  | $ | 1,335,267 |
Fair Value |  | $ | 2,857,082 |  |  |  |  |  |  | $ | 560,529 |  |  |  |  |  |  | $ | 3,417,611 |
At December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-redeemable preferred stock |  | $ | - |  |  |  | - |  |  | $ | 4,224 |  |  |  | 2 |  |  | $ | 4,224 |
Industrial, miscellaneous and all other |  |  | 192,742 |  |  |  | 42 |  |  |  | 164,622 |  |  |  | 13 |  |  |  | 357,364 |
Total unrealized losses |  | $ | 192,742 |  |  |  | 42 |  |  | $ | 168,846 |  |  |  | 15 |  |  | $ | 361,588 |
Fair Value |  | $ | 1,895,632 |  |  |  |  |  |  | $ | 530,253 |  |  |  |  |  |  | $ | 2,425,885 |
As of December 31, 2011, the average market value of the equity securities available for sale was 71.9% of the original investment and the average market value was 87.0% of the original investment as of December 31, 2010. The intent of the Company is to retain equity securities for a period of time sufficient to allow for the recovery in fair value. However, the Company may sell equity securities during a period in which the fair value has declined below the amount of the original investment. In certain situations, new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. During 2011, 2010, and 2009, an other than temporary decline in the market value resulted in the recognition of an impairment loss on equity securities of $52,775, $23,922 and $-0-, respectively. On a quarterly basis, the Company reviews its investment in industrial, miscellaneous and all other equity securities that are in a loss position. The review involves an analysis of the securities in relation to historical values, price earnings ratios, projected earnings and revenue growth rates. Based on the analysis a determination is made whether a security will likely recover from the loss position within a reasonable period of time. If it is unlikely that the investment will recover from the loss position, the loss is considered to be other than temporary, the security is written down to the impaired value and an impairment loss is recognized. No other than temporary impairment loss was considered to exist for these equity securities as of December 31, 2011 and December 31, 2010. The fair values of fixed maturity securities are based on quoted market prices, when available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments. The fair values for equity securities are based on quoted market prices. The amortized cost and estimated fair value of fixed maturity securities at December 31, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|  | Amortized |  |  | Estimated Fair |
|  | Cost |  |  | Value |
Held to Maturity: |  |  |  |  |  |
Due in 2012 |  | $ | 985,359 |  |  | $ | 993,962 |
Due in 2013 through 2016 |  |  | 19,284,419 |  |  |  | 20,765,747 |
Due in 2017 through 2021 |  |  | 50,127,588 |  |  |  | 52,829,557 |
Due after 2021 |  |  | 49,095,665 |  |  |  | 53,559,260 |
Mortgage-backed securities |  |  | 6,575,178 |  |  |  | 6,572,564 |
Redeemable preferred stock |  |  | 1,510,878 |  |  |  | 1,454,317 |
Total held to maturity |  | $ | 127,579,087 |  |  | $ | 136,175,407 |
The amortized cost and estimated fair value of available for sale securities at December 31, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Equities are valued using the specific identification method.
|  | Amortized |  |  | Estimated Fair |
|  | Cost |  |  | Value |
Available for Sale: |  |  |  |  |  |
Due in 2012 |  | $ | - |  |  | $ | - |
Due in 2013 through 2016 |  |  | - |  |  |  | - |
Due in 2017 through 2021 |  |  | - |  |  |  | - |
Due after 2021 |  |  | - |  |  |  | - |
Non-redeemable preferred stock |  |  | 20,281 |  |  |  | 18,438 |
Common stock |  |  | 7,250,991 |  |  |  | 6,280,954 |
Total available for sale |  | $ | 7,271,272 |  |  | $ | 6,299,392 |
The Company’s realized gains and losses and other than temporary impairments from investments and other assets are summarized as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Fixed maturity securities held |  |  |  |  |  |  |  |  |
to maturity: |  |  |  |  |  |  |  |  |
Gross realized gains |  | $ | 939,672 |  |  | $ | 1,300,187 |  |  | $ | 500,795 |
Gross realized losses |  |  | (162,716 | ) |  |  | (494,678 | ) |  |  | (151,069 | )
Other than temporary impairments |  |  | (125,129 | ) |  |  | (150,059 | ) |  |  | (326,000 | )
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |
Gross realized gains |  |  | 590,455 |  |  |  | 686,788 |  |  |  | 1,018,217 |
Gross realized losses |  |  | (118,417 | ) |  |  | (61,530 | ) |  |  | (152,757 | )
Other than temporary impairments |  |  | (52,775 | ) |  |  | (23,922 | ) |  |  | - |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
Gross realized gains |  |  | 1,295,217 |  |  |  | 393,943 |  |  |  | 8,126 |
Gross realized losses |  |  | (79,858 | ) |  |  | (209,292 | ) |  |  | - |
Other than temporary impairments |  |  | (662,831 | ) |  |  | (500,000 | ) |  |  | - |
Total |  | $ | 1,623,618 |  |  | $ | 941,437 |  |  | $ | 897,312 |
The net carrying amount for sales of securities classified as held to maturity was $12,341,156, $16,220,943 and $1,700,388, for the years ended December 31, 2011, 2010 and 2009, respectively. The net realized gain related to these sales was $462,267, $346,225 and $181,285, for the years ended December 31, 2011, 2010 and 2009, respectively. Certain circumstances lead to these decisions to sell. The Company sold held to maturity securities in 2009 that experienced significant deterioration in their value and were liquidated to avoid a potential complete loss in the bond investments of Lehman Brothers and General Motors. Bonds categorized as held to maturity and sold in 2010 were liquidated in order to meet an unexpected increase in mortgage funding demand and the non-renewal of an expired loan purchase agreement with a warehouse bank by SecurityNational Mortgage during the latter part of 2010. This was a rare and unusual event in the history of the Company. In 2011, the Company sold certain held to maturity bonds in gain positions to reduce its risk in certain industries or companies. Other than investments issued or guaranteed by the United States Government, there is one long-term mortgage loan investment in the amount of $8,500,000 which exceeds 10% of shareholders’ equity (before net unrealized gains and losses on available for sale securities) at December 31, 2011. Major categories of net investment income are as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Fixed maturity securities |  | $ | 7,762,894 |  |  | $ | 6,761,254 |  |  | $ | 7,140,920 |
Equity securities |  |  | 272,011 |  |  |  | 238,929 |  |  |  | 794,845 |
Mortgage loans on real estate |  |  | 7,084,995 |  |  |  | 6,154,760 |  |  |  | 5,462,533 |
Real estate |  |  | 2,288,537 |  |  |  | 2,387,489 |  |  |  | 2,147,981 |
Policy, student and other loans |  |  | 835,312 |  |  |  | 897,945 |  |  |  | 811,684 |
Short-term investments, principally gains on sale of mortgage loans |  |  | 6,255,581 |  |  |  | 7,215,927 |  |  |  | 7,896,518 |
Gross investment income |  |  | 24,499,330 |  |  |  | 23,656,304 |  |  |  | 24,254,481 |
Investment expenses |  |  | (4,488,626 | ) |  |  | (5,040,320 | ) |  |  | (4,339,409 | )
Net investment income |  | $ | 20,010,704 |  |  | $ | 18,615,984 |  |  | $ | 19,915,072 |
Net investment income includes net investment income earned by the restricted assets of the cemeteries and mortuaries of $626,688, $635,652 and $576,689 for 2011, 2010 and 2009, respectively. Net investment income on real estate consists primarily of rental revenue received under short-term leases. Investment expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative expenses relating to investment activities. Securities on deposit for regulatory authorities as required by law amounted to $9,593,318 at December 31, 2011 and $9,302,578 at December 31, 2010. The restricted securities are included in various assets under investments on the accompanying consolidated balance sheets. Mortgage Loans Mortgage loans consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0 % to 10.5%, maturity dates range from three months to 30 years and are secured by real estate. Concentrations of credit risk arise when a number of mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified mortgage loan portfolio consisting of residential mortgages, commercial loans and residential construction loans and requires collateral on all real estate exposures, a substantial portion of its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business. At December 31, 2011, the Company has 37%, 11% and 11% of its mortgage loans from borrowers located in the states of Utah, Florida and California, respectively. The mortgage loans on real estate balances on the consolidated balance sheet are reflected net of an allowance for loan losses of $4,881,173 and $7,070,442 at December 31, 2011 and 2010, respectively. The Company establishes a valuation allowance for credit losses in its portfolio. The following is a summary of the allowance for loan losses as a contra-asset account for the periods presented:
Allowance for Credit Losses and Recorded Investment in Mortgage Loans |
For the Years Ended December 31, 2011, and 2010 |
|  | Commercial |  |  | Residential |  |  | Residential Construction |  |  | Total |
2011 |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | - |  |  | $ | 6,212,072 |  |  | $ | 858,370 |  |  | $ | 7,070,442 |
Charge-offs |  |  | - |  |  |  | (2,994,715 | ) |  |  | (430,274 | ) |  |  | (3,424,989 | )
Provision |  |  | - |  |  |  | 1,121,448 |  |  |  | 114,272 |  |  |  | 1,235,720 |
Ending balance |  | $ | - |  |  | $ | 4,338,805 |  |  | $ | 542,368 |  |  | $ | 4,881,173 |
Ending balance: individually evaluated for impairment |  | $ | - |  |  | $ | 738,975 |  |  | $ | 250,524 |  |  | $ | 989,499 |
Ending balance: collectively evaluated for impairment |  | $ | - |  |  | $ | 3,599,830 |  |  | $ | 291,844 |  |  | $ | 3,891,674 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 48,433,147 |  |  | $ | 54,344,327 |  |  | $ | 17,259,666 |  |  | $ | 120,037,140 |
Ending balance: individually evaluated for impairment |  | $ | 2,758,235 |  |  | $ | 4,611,995 |  |  | $ | 5,645,865 |  |  | $ | 13,016,095 |
Ending balance: collectively evaluated for impairment |  | $ | 45,674,912 |  |  | $ | 49,732,332 |  |  | $ | 11,613,801 |  |  | $ | 107,021,045 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | - |  |  | $ | 5,917,792 |  |  | $ | 891,011 |  |  | $ | 6,808,803 |
Charge-offs |  |  | - |  |  |  | (335,853 | ) |  |  | (32,641 | ) |  |  | (368,494 | )
Provision |  |  | - |  |  |  | 630,133 |  |  |  | - |  |  |  | 630,133 |
Ending balance |  | $ | - |  |  | $ | 6,212,072 |  |  | $ | 858,370 |  |  | $ | 7,070,442 |
Ending balance: individually evaluated for impairment |  | $ | - |  |  | $ | 5,131,779 |  |  | $ | 740,000 |  |  | $ | 5,871,779 |
Ending balance: collectively evaluated for impairment |  | $ | - |  |  | $ | 1,080,293 |  |  | $ | 118,370 |  |  | $ | 1,198,663 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 24,502,781 |  |  | $ | 60,285,273 |  |  | $ | 18,436,495 |  |  | $ | 103,224,549 |
Ending balance: individually evaluated for impairment |  | $ | 439,794 |  |  | $ | 7,236,095 |  |  | $ | 2,085,467 |  |  | $ | 9,761,356 |
Ending balance: collectively evaluated for impairment |  | $ | 24,062,987 |  |  | $ | 53,049,178 |  |  | $ | 16,351,028 |  |  | $ | 93,463,193 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
The following is a summary of the aging of mortgage loans for the periods presented.
Age Analysis of Past Due Mortgage Loans |
Years Ended December 31, 2011 and 2010 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days 1) |  |  | In Foreclosure 1) |  |  | Total Past Due |  |  | Current |  |  | Total Mortgage Loans |  |  | Allowance for Loan Losses |  |  | Net Mortgage Loans |
2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | - |  |  | $ | - |  |  | $ | 1,053,500 |  |  | $ | 2,758,235 |  |  | $ | 3,811,735 |  |  | $ | 44,621,412 |  |  | $ | 48,433,147 |  |  | $ | - |  |  | $ | 48,433,147 |
Residential |  |  | 2,478,084 |  |  |  | 2,058,261 |  |  |  | 5,500,340 |  |  |  | 4,611,995 |  |  |  | 14,648,680 |  |  |  | 39,695,647 |  |  |  | 54,344,327 |  |  |  | (4,338,805 | ) |  |  | 50,005,522 |
Residential Construction |  |  | 859,651 |  |  |  | 682,532 |  |  |  | 309,651 |  |  |  | 5,645,865 |  |  |  | 7,497,699 |  |  |  | 9,761,967 |  |  |  | 17,259,666 |  |  |  | (542,368 | ) |  |  | 16,717,298 |
Total |  | $ | 3,337,735 |  |  | $ | 2,740,793 |  |  | $ | 6,863,491 |  |  | $ | 13,016,095 |  |  | $ | 25,958,114 |  |  | $ | 94,079,026 |  |  | $ | 120,037,140 |  |  | $ | (4,881,173 | ) |  | $ | 115,155,967 |
2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | - |  |  | $ | 734,756 |  |  | $ | - |  |  | $ | 439,794 |  |  | $ | 1,174,550 |  |  | $ | 23,328,231 |  |  | $ | 24,502,781 |  |  | $ | - |  |  | $ | 24,502,781 |
Residential |  |  | 767,970 |  |  |  | 782,174 |  |  |  | 3,537,616 |  |  |  | 7,236,095 |  |  |  | 12,323,855 |  |  |  | 47,961,418 |  |  |  | 60,285,273 |  |  |  | (6,212,072 | ) |  |  | 54,073,201 |
Residential Construction |  |  | 849,375 |  |  |  | 1,543,593 |  |  |  | 994,046 |  |  |  | 2,085,467 |  |  |  | 5,472,481 |  |  |  | 12,964,014 |  |  |  | 18,436,495 |  |  |  | (858,370 | ) |  |  | 17,578,125 |
Total |  | $ | 1,617,345 |  |  | $ | 3,060,523 |  |  | $ | 4,531,662 |  |  | $ | 9,761,356 |  |  | $ | 18,970,886 |  |  | $ | 84,253,663 |  |  | $ | 103,224,549 |  |  | $ | (7,070,442 | ) |  | $ | 96,154,107 |
1) There was not any interest income recognized on loans past due greater than 90 days or in foreclosure. |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired Mortgage Loans Impaired mortgage loans include loans with a related specific valuation allowance or loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary. The recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, for each reporting period and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:
Impaired Loans |
For the Years Ended December 31, 2011, and 2010 |
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 3,811,735 |  |  | $ | 3,811,735 |  |  |  |  |  | $ | 3,811,735 |  |  | $ | - |
Residential |  |  | 5,500,340 |  |  |  | 5,500,340 |  |  |  |  |  |  | 5,500,340 |  |  |  | - |
Residential construction |  |  | 309,651 |  |  |  | 309,651 |  |  |  |  |  |  | 309,651 |  |  |  | - |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Residential |  |  | 4,611,995 |  |  |  | 4,611,995 |  |  |  | 738,975 |  |  |  | 4,611,995 |  |  |  | - |
Residential construction |  |  | 5,645,865 |  |  |  | 5,645,865 |  |  |  | 250,524 |  |  |  | 5,645,865 |  |  |  | - |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 3,811,735 |  |  | $ | 3,811,735 |  |  | $ | - |  |  | $ | 3,811,735 |  |  | $ | - |
Residential |  |  | 10,112,335 |  |  |  | 10,112,335 |  |  |  | 738,975 |  |  |  | 10,112,335 |  |  |  | - |
Residential construction |  |  | 5,955,516 |  |  |  | 5,955,516 |  |  |  | 250,524 |  |  |  | 5,955,516 |  |  |  | - |
2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 439,794 |  |  | $ | 439,794 |  |  |  |  |  |  | $ | 439,794 |  |  | $ | - |
Residential |  |  | 3,537,616 |  |  |  | 3,537,616 |  |  |  |  |  |  |  | 3,537,616 |  |  |  | - |
Residential construction |  |  | 994,046 |  |  |  | 994,046 |  |  |  |  |  |  |  | 994,046 |  |  |  | - |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Residential |  |  | 7,236,095 |  |  |  | 7,236,095 |  |  |  | 5,131,779 |  |  |  | 7,236,095 |  |  |  | - |
Residential construction |  |  | 2,085,467 |  |  |  | 2,085,467 |  |  |  | 740,000 |  |  |  | 2,085,467 |  |  |  | - |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 439,794 |  |  | $ | 439,794 |  |  | $ | - |  |  | $ | 439,794 |  |  | $ | - |
Residential |  |  | 10,773,711 |  |  |  | 10,773,711 |  |  |  | 5,131,779 |  |  |  | 10,773,711 |  |  |  | - |
Residential construction |  |  | 3,079,513 |  |  |  | 3,079,513 |  |  |  | 740,000 |  |  |  | 3,079,513 |  |  |  | - |
Credit Risk Profile Based on Performance Status The Company’s mortgage loan portfolio is monitored based on performance of the loans. Monitoring a mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The Company defines non-performing mortgage loans as loans 90 days or greater delinquent or on non-accrual status. The Company’s performing and non-performing mortgage loans were as follows:
Mortgage Loan Credit Exposure |
Credit Risk Profile Based on Payment Activity |
As of December 31, 2011, and 2010 |
|  | Commercial |  |  | Residential |  |  | Residential Construction |  |  | Total |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Performing |  | $ | 44,621,412 |  |  | $ | 24,062,987 |  |  | $ | 44,231,992 |  |  | $ | 49,511,562 |  |  | $ | 11,304,150 |  |  | $ | 15,356,982 |  |  | $ | 100,157,554 |  |  | $ | 88,931,531 |
Nonperforming |  |  | 3,811,735 |  |  |  | 439,794 |  |  |  | 10,112,335 |  |  |  | 10,773,711 |  |  |  | 5,955,516 |  |  |  | 3,079,513 |  |  |  | 19,879,586 |  |  |  | 14,293,018 |
Total |  | $ | 48,433,147 |  |  | $ | 24,502,781 |  |  | $ | 54,344,327 |  |  | $ | 60,285,273 |  |  | $ | 17,259,666 |  |  | $ | 18,436,495 |  |  | $ | 120,037,140 |  |  | $ | 103,224,549 |
Non-Accrual Mortgage Loans Once a loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and write off any income that had been accrued. Interest not accrued on these loans totals $2,023,000 and $1,852,000 as of December 31, 2011 and 2010, respectively. The following is a summary of mortgage loans on a nonaccrual status for the periods presented.
|  | Mortgage Loans on Nonaccrual Status |
|  | As of December 31, 2011, and 2010 |
|  | 2011 |  |  | 2010 |
Commercial |  | $ | 3,811,735 |  |  | $ | 439,794 |
Residential |  |  | 10,112,335 |  |  |  | 10,773,711 |
Residential construction |  |  | 5,955,516 |  |  |  | 3,079,513 |
Total |  | $ | 19,879,586 |  |  | $ | 14,293,018 |
Principal Amounts Due The amortized cost and contractual payments on mortgage loans on real estate and construction loans held for investment by category as of December 31, 2011 are shown below. Expected principal payments may differ from contractual obligations because certain borrowers may elect to pay off mortgage obligations with or without early payment penalties.
|  |  |  |  | Principal |  |  | Principal |  |  | Principal |
|  |  |  |  | Amounts |  |  | Amounts |  |  | Amounts |
|  |  |  |  | Due in |  |  | Due in |  |  | Due |
|  | Total |  |  | 2012 |  |  |  | 2013-2016 |  |  | Thereafter |
Residential |  | $ | 54,344,327 |  |  | $ | 1,888,024 |  |  | $ | 5,911,105 |  |  | $ | 46,545,198 |
Residential Construction |  |  | 17,259,666 |  |  |  | 17,259,666 |  |  |  | - |  |  |  | - |
Commercial |  |  | 48,433,147 |  |  |  | 29,132,743 |  |  |  | 12,225,603 |  |  |  | 7,074,801 |
Total |  | $ | 120,037,140 |  |  | $ | 48,280,433 |  |  | $ | 18,136,708 |  |  | $ | 53,619,999 |
Loan Loss Reserve When a repurchase demand is received from a third party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated. The key factors that are used in the estimated loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a repurchase demand. In many instances, the Company is able to resolve the issues relating to the repurchase demand by the third party investor without having to make any payments to the investor. The following is a summary of the loan loss reserve which is included in other liabilities and accrued expenses:
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |
Balance, beginning of period |  | $ | 5,899,025 |  |  | $ | 11,662,897 |
Provisions for losses |  |  | 1,667,805 |  |  |  | 4,534,231 |
Charge-offs |  |  | (5,228,955 | ) |  |  | (10,298,103 | )
Balance, at December 31 |  | $ | 2,337,875 |  |  | $ | 5,899,025 |
The Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date. The loan loss reserve may not be adequate, however, for claims asserted by third party investors. Actual loan loss experience could change, in the near-term, from the established reserve based upon claims asserted by third party investors. If SecurityNational Mortgage is unable to negotiate acceptable terms with the third party investors, legal action may ensue in an effort to obtain amounts that the third party investors claim are allegedly due. In the event of legal action, if SecurityNational Mortgage is not successful in its defenses against claims asserted by these third party investors to the extent that a substantial judgment is entered against SecurityNational Mortgage which is beyond its capacity to pay, SecurityNational Mortgage may be required to curtail or cease operations.

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- Definition The entire disclosure for investments, including all tables. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 12 + Details
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