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3) Investments
 6 Months Ended
Jun. 30, 2014
Notes  
3) Investments

 

3)      Investments

 

The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of June 30, 2014 are summarized as follows:

Amortized Cost

Gross Unrealized Gains

 Gross Unrealized Losses

 Estimated Fair Value

June 30, 2014:

 

 

 

 

Fixed maturity securities held to maturity carried at amortized cost:

Bonds:

U.S. Treasury securities and obligations of U.S. Government agencies

 $         1,877,830

 $          335,092

 $                    -

 $         2,212,922

Obligations of states and political subdivisions

            1,734,871

             249,165

              (5,504)

            1,978,532

Corporate securities including public utilities

        130,790,757

        16,222,135

          (259,907)

        146,752,985

Mortgage-backed securities

            3,901,988

             314,204

            (10,806)

            4,205,386

Redeemable preferred stock

               612,023

               16,432

                     -  

               628,455

Total fixed maturity securities held to maturity

 $     138,917,469

 $     17,137,028

 $       (276,217)

 $     155,778,280

 

 

 

 

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

June 30, 2014:

 

 

 

 

Equity securities available for sale at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

 $         7,533,929

 $    429,683

 $       (520,852)

 $    7,442,760

Total equity securities available for sale at estimated fair value

 $         7,533,929

 $    429,683

 $       (520,852)

 $    7,442,760

Mortgage loans on real estate and construction loans held for investment at amortized cost:

Residential

$       61,422,422

Residential construction

          20,414,105

Commercial

          47,266,708

Less: Allowance for loan losses

          (1,694,932)

Total mortgage loans on real estate and construction loans held for investment

$     127,408,303

Real estate held for investment - net of depreciation

$     101,388,355

Policy and other loans at amortized cost:

Policy loans

$         7,281,130

Other loans

          26,447,688

Less: Allowance for doubtful accounts

             (532,433)

Total policy and other loans at amortized cost

$       33,196,385

Short-term investments at amortized cost

$       20,268,060

 

The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2013 are summarized as follows:

Amortized Cost 

Gross Unrealized Gains

 Gross Unrealized Losses  

 Estimated Fair Value  

December 31, 2013:

 

 

 

 

Fixed maturity securities held to maturity carried at amortized cost:

Bonds:

U.S. Treasury securities and obligations of U.S. Government agencies

 $         2,284,261

 $          298,901

 $                    -

 $         2,583,162

Obligations of states and political subdivisions

            1,790,661

             197,340

              (9,404)

            1,978,597

Corporate securities including public utilities

        134,257,468

        10,513,448

       (1,394,919)

        143,375,997

Mortgage-backed securities

            4,522,081

             206,617

            (11,351)

            4,717,347

Redeemable preferred stock

               612,023

               12,994

              (5,900)

               619,117

Total fixed maturity securities held to maturity

 $     143,466,494

 $     11,229,300

 $    (1,421,574)

 $     153,274,220

 

 

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2013:

 

 

 

 

Equity securities available for sale at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

 $         4,783,936

 $      240,206

 $      (525,386)

 $    4,498,756

Total securities available for sale carried at estimated fair value

 $         4,783,936

 $      240,206

 $      (525,386)

 $    4,498,756

Mortgage loans on real estate and construction loans held for investment at amortized cost:

Residential

$       49,868,486

Residential construction

          12,912,473

Commercial

          41,653,009

Less: Allowance for loan losses

          (1,652,090)

Total mortgage loans on real estate and construction loans held for investment

$     102,781,878

Real estate held for investment - net of depreciation

$       99,760,475

Policy and other loans at amortized cost:

Policy loans

$         7,520,376

Other loans

          12,472,805

Less: Allowance for doubtful accounts

             (269,175)

Total policy and other loans at amortized cost

$       19,724,006

Short-term investments at amortized cost

$       12,135,719

Fixed Maturity Securities

 

The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at June 30, 2014 and December 31, 2013. 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, 2014

 

 

 

 

 

Obligations of states and political subdivisions

 $                    -

0

 $          5,504

1

 $            5,504

Corporate securities including public utilities

             28,127

3

         231,780

22

           259,907

Mortgage-backed securities

               2,674

1

             8,132

1

             10,806

Redeemable preferred stock

                       -

0

                     -

0

                       -

Total unrealized losses

 $          30,801

4

 $      245,416

24

 $        276,217

Fair Value

$        757,752

$   5,110,986

$     5,868,738

At December 31, 2013

Obligations of states and political subdivisions

 $            7,131

1

 $          2,273

1

 $            9,404

Corporate securities including public utilities

        1,134,414

72

         260,504

10

        1,394,919

Mortgage-backed securities

               3,109

1

             8,242

1

             11,351

Redeemable preferred stock

               5,900

1

                     -

0

               5,900

Total unrealized losses

 $     1,150,554

75

 $      271,019

12

 $     1,421,574

Fair Value

$   22,002,277

$   2,308,464

$   24,310,741

 

 

 

As of June 30, 2014, the average market value of the related fixed maturities was 95.5% of amortized cost and the average market value was 94.5% of amortized cost as of December 31, 2013. During the three months ended June 30, 2014 and 2013 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $30,000 and $30,000, respectively, and for the six months ended June 30, 2014 and 2013 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $60,000 and $60,000, respectively.

 

On a quarterly basis, the Company reviews its fixed maturity 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.

 

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, 2014 and December 31, 2013. 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, 2014

 

 

 

 

 

Industrial, miscellaneous and all other

 $        85,985

97

 $      434,867

29

 $      520,852

Total unrealized losses

 $        85,985

97

 $      434,867

29

 $      520,852

Fair Value

$   1,418,657

$      822,995

$   2,241,652

At December 31, 2013

Industrial, miscellaneous and all other

 $      119,450

28

 $      405,936

28

 $      525,386

Total unrealized losses

 $      119,450

28

 $      405,936

28

 $      525,386

Fair Value

$      993,612

$      772,345

$   1,765,957

 

 

As of June 30, 2014, the average market value of the equity securities available for sale was 81.1% of the original investment and the average market value was 77.1% of the original investment as of December 31, 2013. 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 three and six months ended June 30, 2014 and 2013, 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.

 

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, 2014, 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 2014 

 $         1,998,597

 $         2,014,415

Due in 2015 through 2018

          28,025,560

          31,140,613

Due in 2019 through 2023

          37,841,385

          42,592,185

Due after 2023

          66,537,916

          75,197,226

Mortgage-backed securities

            3,901,988

            4,205,386

Redeemable preferred stock

               612,023

               628,455

Total held to maturity

 $     138,917,469

 $     155,778,280

 

 

 

The amortized cost and estimated fair value of available for sale securities at June 30, 2014, 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 2014

 $                   -

 $                       -

Due in 2015 through 2018

                      -

                          -

Due in 2019 through 2023

                      -

                          -

Due after 2023

                      -

                          -

    Non-redeemable preferred stock

                      -

                          -

Common stock

       7,533,929

           7,442,760

Total available for sale

 $    7,533,929

 $        7,442,760

 

 

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

2014

2013

2014

2013

Fixed maturity securities held to maturity:

Gross realized gains

 $        47,548

 $          2,512

 $        47,548

 $        15,404

Gross realized losses

           (2,284)

           (9,693)

           (2,284)

         (15,168)

Other than temporary impairments

         (30,000)

         (30,000)

         (60,000)

         (60,000)

Securities available for sale:

Gross realized gains

           72,397

         105,426

         125,650

         239,382

Gross realized losses

                   -

           (1,942)

                   -

           (2,678)

Other than temporary impairments

                   -

                   -

                   -

                   -

Other assets:

Gross realized gains

         222,191

           43,879

         367,931

         745,820

Gross realized losses

                   -

                   -

                   -

                   -

Other than temporary impairments

                   -

        (115,922)

                   -

        (115,922)

Total

$      309,852

$        (5,740)

$      478,845

$      806,838

 

The net carrying amount of held to maturity securities sold was $872,882 and $1,455,835 for the six months ended June 30, 2014 and the year ended December 31, 2013, respectively.  The net realized gain related to these sales was $40,594 and $-0- for the three months ended June 30, 2014 and 2013, respectively, and was $42,118 and $12,533 for the six months ended June 30, 2014 and 2013, respectively. Certain circumstances lead to these decisions to sell.

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, 2014, 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

2014

2013

2014

2013

Fixed maturity securities

 $     2,067,324

 $     2,056,804

 $     4,176,445

 $     4,009,843

Equity securities

            50,752

            38,729

            89,999

          104,489

Mortgage loans on real estate

        1,837,060

        1,011,446

        3,389,171

        2,051,221

Real estate

        2,126,566

        1,363,662

        4,291,565

        2,441,324

Policy and other loans

          181,687

          196,096

          379,255

          399,231

Short-term investments,  principally gains on sale of mortgage loans and other

        2,781,988

        2,371,299

        4,681,101

        4,578,893

Gross investment income

        9,045,377

        7,038,036

      17,007,536

      13,585,001

Investment expenses

      (2,338,090)

      (2,011,992)

      (4,657,749)

      (3,557,940)

Net investment income

 $     6,707,287

 $     5,026,044

 $   12,349,787

 $   10,027,061

 

 

 

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $77,254 and $74,539 for the three months ended June 30, 2014 and 2013, respectively, and $171,999 and $166,009 for the six months ended June 30, 2014 and 2013, 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 $9,208,890 at June 30, 2014 and $9,215,222 at December 31, 2013. 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%, maturity dates range from six 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 June 30, 2014, the Company had 35%, 19%, 11%, 13%, and 5% of its mortgage loans from borrowers located in the states of Utah, California, Florida, Texas, and Nevada, respectively. The mortgage loans on real estate balances on the consolidated balance sheet are reflected net of an allowance for loan losses of $1,694,932 and $1,652,090 at June 30, 2014 and December 31, 2013, 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, 2014

Allowance for credit losses:

Beginning balance - January 1, 2014

 $        187,129

 $     1,364,847

 $        100,114

 $     1,652,090

   Charge-offs

                       -

            (38,444)

                       -

            (38,444)

   Provision

                       -

             81,286

                       -

             81,286

Ending balance -June 30, 2014

 $        187,129

 $     1,407,689

 $        100,114

 $     1,694,932

Ending balance: individually evaluated for impairment

 $                    -

 $        119,897

 $                    -

 $        119,897

Ending balance: collectively evaluated for impairment

 $        187,129

 $     1,287,792

 $        100,114

 $     1,575,035

Ending balance: loans acquired with deteriorated credit quality

 $                    -

 $                    -

 $                    -

 $                    -

Mortgage loans:

Ending balance

 $   47,266,708

 $   61,422,422

 $   20,414,105

 $ 129,103,235

Ending balance: individually evaluated for impairment

 $                    -

 $        960,360

 $                    -

 $        960,360

Ending balance: collectively evaluated for impairment

 $   47,266,708

 $   60,462,062

 $   20,414,105

 $ 128,142,875

Ending balance: loans acquired with deteriorated credit quality

 $                    -

 $                    -

 $                    -

 $                    -

December 31, 2013

Allowance for credit losses:

Beginning balance - January 1, 2013

 $                    -

 $     4,193,674

 $          46,187

 $     4,239,861

   Charge-offs

                       -

       (2,670,794)

          (137,629)

       (2,808,423)

   Provision

           187,129

          (158,033)

           191,556

           220,652

Ending balance - December 31, 2013

 $        187,129

 $     1,364,847

 $        100,114

 $     1,652,090

Ending balance: individually evaluated for impairment

 $                    -

 $        152,745

 $                    -

 $        152,745

Ending balance: collectively evaluated for impairment

 $        187,129

 $     1,212,102

 $        100,114

 $     1,499,345

Ending balance: loans acquired with deteriorated credit quality

 $                    -

 $                    -

 $                    -

 $                    -

Mortgage loans:

Ending balance

 $   41,653,009

 $   49,868,486

 $   12,912,473

 $ 104,433,968

Ending balance: individually evaluated for impairment

 $                    -

 $     1,518,327

 $                    -

 $     1,518,327

Ending balance: collectively evaluated for impairment

 $   41,653,009

 $   48,350,159

 $   12,912,473

 $ 102,915,641

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, 2014

 

 

 

 

 

 

 

 

Commercial

 $       -

 $     -

 $        -

 $       -

 $       -

 $    47,266,708

 $      47,266,708

 $ (187,129)

 $      47,079,579

Residential

          1,052,534

          1,989,725

              5,171,118

                960,360

             9,173,737

        52,248,685

           61,422,422

          (1,407,689)

           60,014,733

Residential   Construction

                           -

                           -

                64,895

                              -

                  64,895

         20,349,210

            20,414,105

                (100,114)

            20,313,991

Total

 $      1,052,534

 $      1,989,725

 $       5,236,013

 $            960,360

 $        9,238,632

 $ 119,864,603

 $      129,103,235

 $      (1,694,932)

 $    127,408,303

December 31, 2013

Commercial

 $            -

 $         -

 $           -

 $        4,973,745

 $        4,973,745

 $    36,679,264

 $       41,653,009

 $ (187,129)

 $       41,465,880

Residential

          1,646,953

          1,604,847

           5,867,501

              1,518,327

          10,637,628

        39,230,858

          49,868,486

          (1,364,847)

          48,503,639

Residential   Construction

                           -

                           -

                64,895

                              -

                  64,895

         12,847,578

            12,912,473

                (100,114)

            12,812,359

Total

 $      1,646,953

 $      1,604,847

 $      5,932,396

 $        6,492,072

 $      15,676,268

 $    88,757,700

 $     104,433,968

 $      (1,652,090)

 $     102,781,878

(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, 2014

With no related allowance recorded:

  Commercial

$                  -

$                   -

 $                  -

$                  -

$                   -

   Residential

                     -

                      -

                     -

-

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

With an allowance recorded:

  Commercial

$                  -

$                   -

$                  -

$                  -

$                   -

   Residential

          960,360

          960,360

         119,897

          960,360

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

Total:

   Commercial

$                  -

$                   -

$                  -

$                  -

$                   -

   Residential

       960,360

       960,360

         119,897

       960,360

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

December 31, 2013

With no related allowance recorded:

  Commercial

$                  -

$                   -

 $                  -

$                  -

$                   -

   Residential

                     -

                      -

                     -

                     -

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

With an allowance recorded:

  Commercial

$                  -

$                   -

$                  -

$                  -

$                   -

   Residential

      1,518,327

      1,518,327

         152,745

      1,518,327

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

Total:

   Commercial

$                  -

$                   -

$                  -

$                  -

$                   -

   Residential

      1,518,327

      1,518,327

         152,745

      1,518,327

                      -

   Residential construction

                     -

                      -

                     -

                     -

                      -

 

 

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, 2014

December 31, 2013

June 30, 2014

December 31, 2013

June 30, 2014

December 31, 2013

June 30, 2014

December 31, 2013

Performing

 $  47,266,708

 $36,679,264

 $55,290,944

 $42,482,658

 $20,349,210

 $12,847,578

 $122,906,862

 $92,009,500

Nonperforming

                              -

        4,973,745

           6,131,478

         7,385,828

               64,895

               64,895

          6,196,373

        12,424,468

Total

 $  47,266,708

 $41,653,009

 $61,422,422

 $49,868,486

 $20,414,105

 $12,912,473

 $129,103,235

 $104,433,968

 

 

 

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 $468,000 and $678,000 as of June 30, 2014 and December 31, 2013, 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 2014

As of December 31 2013

Commercial

 $           -

 $ 4,973,745

Residential

                       6,131,478

                      7,385,828

Residential construction

                            64,895

                           64,895

Total

 $  6,196,373

 $ 12,424,468

 

 

 

Loan Loss Reserve

 

The mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on mortgage loans sold to third party investors.

 

The loan loss reserve analysis involves mortgage loans that have been sold to third party investors where the Company has received a demand from the investor. There are generally three types of demands: make whole, repurchase, or indemnification. These types of demands are more particularly described as follows:

 

Make whole demand – A make whole demand occurs when an investor forecloses on a property and then sells the property. The make whole amount is calculated as the difference between the original unpaid principal balance, accrued interest and fees, less the sale proceeds.

 

Repurchase demand – A repurchase demand usually occurs when there is a significant payment default, error in underwriting or detected loan fraud.

 

Indemnification demand – On certain loans the Company has negotiated a set fee that is to be paid in lieu of repurchase. The fee varies by investor and by loan product type.

 

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 2014

As of December 31 2013

Balance, beginning of period

 $                5,506,532

 $               6,035,295

Provisions for losses

                      943,425

                  1,846,285

Charge-offs

                    (240,997)

                (2,375,048)

Balance, end of period

 $                6,208,960

 $               5,506,532

 

 

 

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.