The Company’s investments in fixed maturity securities held-to-maturity and equity securities available for sale as of June 30, 2012 are summarized as follows:

	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
June 30, 2012:

Equity securities available for sale at estimated fair value:

Non-redeemable preferred stock	$ 20,281	$ -	$ (1,797)	$ 18,484

Common stock:

Industrial, miscellaneous and all other	6,840,761	378,015	(1,354,827)	5,863,949

Total equity securities available for sale at estimated fair value	$6,861,042	$378,015	$(1,356,624)	$5,882,433

Mortgage loans on real estate and construction loans held for investment at amortized cost:
Residential	$52,498,871
Residential construction	9,085,386
Commercial	41,090,847
Less: Allowance for loan losses	(4,699,410)
Total mortgage loans on real estate and construction loans held for investment	$97,975,694

Real estate held for investment - net of depreciation	$4,272,796
Other real estate owned held for investment - net of depreciation	56,127,842
Other real estate owned held for sale	5,998,740
Total real estate	$66,399,378

Policy and other loans at amortized cost - net of allowance for doubtful accounts	$17,818,019

Short-term investments at amortized cost	$5,562,045

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:

	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair 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

	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair 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

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 and other loans at amortized cost - net of allowance for doubtful accounts	$18,463,277

Short-term investments at amortized cost	$6,932,023

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at June 30, 2012 and December 31, 2011. 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 June 30, 2012
Obligations of states and political subdivisions	$ -	0	$ 6,560	2	$ 6,560
Corporate securities including public utilities	598,070	22	811,199	17	1,409,269
Mortgage-backed securities	54,149	1	139,831	3	193,980
Redeemable preferred stock	-	0	8,000	1	8,000
Total unrealized losses	$ 652,219	23	$ 965,590	23	$1,617,809
Fair Value	$10,581,908		$8,353,472		$18,935,380

At December 31, 2011
Obligations of states and political subdivisions	$ -	0	$ 13,156	2	$ 13,156
Corporate securities including public utilities	1,544,224	47	723,922	12	2,268,146
Mortgage-backed securities	161,300	3	195,600	1	356,900
Redeemable preferred stock	800	1	128,400	1	129,200
Total unrealized losses	$1,706,324	51	$1,061,078	16	$2,767,402
Fair Value	$24,249,533		$3,762,892		$28,012,425

As of June 30, 2012, the average market value of the related fixed maturities was 92.1% of amortized cost and the average market value was 91.0% of amortized cost as of December 31, 2011. During the six months ended June 30, 2012 and 2011 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $90,000 and $65,129, 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 maturity securities as of June 30, 2012 and 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 June 30, 2012 and December 31, 2011. The unrealized losses were primarily the result of decreases in fair 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 June 30, 2012
Non-redeemable preferred stock	$ 213	1	$ 1,584	1		$ 1,797
Industrial, miscellaneous and all other	582,951	61	771,876	30		1,354,827
Total unrealized losses	$ 583,164	62	$ 773,460	31		$1,356,624
Fair Value	$2,213,889		$1,005,768			$3,219,657

At December 31, 2011
Non-redeemable preferred stock	$ 0	-	$ 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

As of June 30, 2012, the average market value of the equity securities available for sale was 70.4% of the original investment and the average market value was 71.9% of the original investment as of December 31, 2011. 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 the six months ended June 30, 2012 and 2011, there was no other than temporary decline in fair value.

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 June 30, 2012 and 2011.

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 June 30, 2012, 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 Cost	Estimated Fair Value
Held to Maturity:
Due in 2012	$ 577,059	$ 582,761
Due in 2013 through 2016	19,254,387	20,942,282
Due in 2017 through 2021	50,167,095	54,454,126
Due after 2021	54,734,973	61,201,021
Mortgage-backed securities	5,348,172	5,442,218
Redeemable preferred stock	1,510,878	1,578,350
Total held to maturity	$131,592,564	$144,200,758

The amortized cost and estimated fair value of available for sale securities at June 30, 2012, 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 Cost	Estimated Fair Value
Available for Sale:
Due in 2012 through 2015	$ -	$ -
Due in 2013 through 2016	-	-
Due in 2017 through 2021	-	-
Due after 2021	-	-
Non-redeemable preferred stock	20,281	18,484
Common stock	6,840,761	5,863,949
Total available for sale	$6,861,042	$5,882,433

The Company’s realized gains and losses, other than temporary impairments from investments and other assets, are summarized as follows:

		Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Fixed maturity securities held to maturity:
Gross realized gains		$ 129,651		$ 166,465		$ 137,255		$ 319,957
Gross realized losses		-		(93,736)		(334)		(131,821)
Other than temporary impairments		(45,000)		(30,000)		(90,000)		(65,129)

Securities available for sale:
Gross realized gains		15,372		166,872		152,580		455,123
Gross realized losses		-		(27,950)		(5,705)		(34,804)
Other than temporary impairments		-		-		-		-

Other assets:
Gross realized gains		54,583		1,045,915		86,870		1,055,071
Gross realized losses		(12,680)		-		(12,680)		(60,870)
Other than temporary impairments		-		-		-		-
Total		$141,926		$1,227,566		$ 267,986		$1,537,527

The net carrying amount of held to maturity securities sold was $341,173 and $12,341,156 for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively. The net realized gain related to these sales was $7,242 and $462,267 for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively. Certain circumstances lead to these decisions to sell. In 2012 and 2011, the Company sold certain held to maturity bonds in gain positions to reduce its risk in certain industries or companies.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on available-for-sale securities) at June 30, 2012, other than investments issued or guaranteed by the United States Government.

Major categories of net investment income are as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Fixed maturity securities	$ 1,943,272	$ 1,986,480	$ 3,853,617	$ 3,739,257
Equity securities	68,146	59,000	131,723	126,986
Mortgage loans on real estate	2,075,430	1,699,220	4,212,006	2,986,433
Real estate	800,339	566,777	1,458,794	1,138,089
Policy and other loans	189,947	210,914	418,274	424,032
Short-term investments, principally gains on sale of mortgage loans and other	2,006,325	1,346,332	4,043,731	2,720,664
Gross investment income	7,083,459	5,868,723	14,118,145	11,135,461
Investment expenses	(945,561)	(1,151,365)	(1,926,200)	(2,147,655)
Net investment income	$ 6,137,898	$ 4,717,358	$ 12,191,945	$ 8,987,806

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $168,989 and $170,649 for six months ended June 30, 2012 and 2011, 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 $9,624,656 at June 30, 2012 and $9,593,318 at December 31, 2011. The restricted securities are included in various assets under investments on the accompanying condensed 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% per annum, 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 live or do business. At June 30, 2012, the Company had 31%, 13% and 12% of its mortgage loans from borrowers located in the states of Utah, California and Florida, respectively. The mortgage loans on real estate balances on the consolidated balance sheet are reflected net of an allowance for loan losses of $4,699,410 and $4,881,173 at June 30, 2012 and December 31, 2011, 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

	Commercial	Residential	Residential Construction	Total
June 30, 2012
Allowance for credit losses:
Beginning balance - January 1, 2011	$ -	$ 4,338,805	$ 542,368	$ 4,881,173
Charge-offs	-	(168,154)	(250,524)	(418,678)
Provision	-	236,915	-	236,915
Ending balance -March 31, 2012	$ -	$ 4,407,566	$ 291,844	$ 4,699,410

Ending balance: individually evaluated for impairment	$ -	$ 885,968	$ 188,285	$ 1,074,253

Ending balance: collectively evaluated for impairment	$ -	$ 3,521,598	$ 103,559	$ 3,625,157

Ending balance: loans acquired with deteriorated credit quality	$ -	$ -	$ -	$ -

Mortgage loans:
Ending balance	$ 41,090,847	$ 52,498,871	$ 9,085,386	$ 102,675,104

Ending balance: individually evaluated for impairment	$ 2,842,962	$ 5,403,395	$ 3,712,761	$ 11,959,118

Ending balance: collectively evaluated for impairment	$ 38,247,885	$ 47,095,476	$ 5,372,625	$ 90,715,986

Ending balance: loans acquired with deteriorated credit quality	$ -	$ -	$ -	$ -

December 31, 2011
Allowance for credit losses:
Beginning balance - January 1, 2011	$ -	$ 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 - December 31, 2011	$ -	$ 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	$ -	$ -	$ -	$ -

The following is a summary of the aging of mortgage loans for the periods presented:

Age Analysis of Past Due Mortgage Loans

	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
June 30, 2012
Commercial	$ 572,215	$ -	$ -	$ 2,842,962	$ 3,415,177	$ 37,675,670	$ 41,090,847	$ -	$ 41,090,847
Residential	807,321	2,179,410	4,251,414	5,403,395	12,641,540	39,857,331	52,498,871	(4,407,566)	48,091,305
Residential Construction	427,950	-	1,083,731	3,712,761	5,224,442	3,860,944	9,085,386	(291,844)	8,793,542

Total	$ 1,807,486	$ 2,179,410	$ 5,335,145	$ 11,959,118	$ 21,281,159	$ 81,393,945	$ 102,675,104	$ (4,699,410)	$ 97,975,694

December 31, 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

1) Interest income is not 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

	Recorded Investment	Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
June 30, 2012
With no related allowance recorded:
Commercial	$ 2,842,962	$ 2,842,962	$ -	$ 2,842,962	$ -
Residential	4,251,414	4,251,414	-	4,251,414	-
Residential construction	1,083,731	1,083,731	-	1,083,731	-

With an allowance recorded:
Commercial	$ -	$ -	$ -	$ -	$ -
Residential	5,403,395	5,403,395	885,968	5,403,395	-
Residential construction	3,712,761	3,712,761	188,285	3,712,761	-

Total:
Commercial	$ 2,842,962	$ 2,842,962	$ -	$ 2,842,962	$ -
Residential	9,654,809	9,654,809	885,968	9,654,809	-
Residential construction	4,796,492	4,796,492	188,285	4,796,492	-

December 31, 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	-

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 past due 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
	Commercial		Residential		Residential Construction		Total
	June 30, 2012	December 31, 2011	June 30, 2012	December 31, 2011	June 30, 2012	December 31, 2011	June 30, 2012	December 31, 2011

Performing	$ 38,247,885	$ 44,621,412	$ 42,844,062	$ 44,231,992	$ 4,288,894	$ 11,304,150	$ 85,380,841	$ 100,157,554
Nonperforming	2,842,962	3,811,735	9,654,809	10,112,335	4,796,492	5,955,516	17,294,263	19,879,586

Total	$ 41,090,847	$ 48,433,147	$ 52,498,871	$ 54,344,327	$ 9,085,386	$ 17,259,666	$ 102,675,104	$ 120,037,140

Non-Accrual Mortgage Loans

Once a loan is past due 90 days, it is the Company’s policy 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 $1,984,000 and $2,308,000 as of June 30, 2012 and December 31, 2011, respectively.

The following is a summary of mortgage loans on a nonaccrual status for the periods presented.

	Mortgage Loans on Nonaccrual Status

	As of June 30,	As of December 31,
	2012	2011
Commercial	$ 2,842,962	$ 3,811,735
Residential	9,654,809	10,112,335
Residential construction	4,796,492	5,955,516
Total	$ 17,294,263	$ 19,879,586

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 that is included in other liabilities and accrued expenses:

	As of June 30,	As of December 31,
	2012	2011
Balance, beginning of period	$2,337,875	$5,899,025
Provisions for losses	1,535,315	1,667,805
Charge-offs	(249,370)	(5,228,955)
Balance, end of period	$3,623,820	$2,337,875

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.