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3) Investments | 3 Months Ended
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Mar. 31, 2015
Notes |
3) Investments | 3) Investments The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of March 31, 2015 are summarized as follows:
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
March 31, 2015 |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity carried at amortized cost: |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 1,870,964 |  | $ 361,034 |  | $ - |  | $ 2,231,998
Obligations of states and political subdivisions |  | 1,984,709 |  | 247,576 |  | (4,322) |  | 2,227,963
Corporate securities including public utilities |  | 124,944,246 |  | 16,894,360 |  | (830,091) |  | 141,008,515
Mortgage-backed securities |  | 3,859,088 |  | 311,980 |  | (467) |  | 4,170,601
Redeemable preferred stock |  | 612,023 |  | 35,937 |  | - |  | 647,960
Total fixed maturity securities held to maturity |  | $ 133,271,030 |  | $ 17,850,887 |  | $ (834,880) |  | $ 150,287,037
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
March 31, 2015 |  |  |  |  |  |  |  |
Equity securities available for sale at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 7,095,225 |  | $ 298,891 |  | $ (1,010,614) |  | $ 6,383,502
Total equity securities available for sale at estimated fair value |  | $ 7,095,225 |  | $ 298,891 |  | $ (1,010,614) |  | $ 6,383,502
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 52,045,350 |  |  |  |  |  |
Residential construction |  | 29,684,359 |  |  |  |  |  |
Commercial |  | 46,067,130 |  |  |  |  |  |
Less: Allowance for loan losses |  | (1,902,396) |  |  |  |  |  |
Total mortgage loans on real estate and construction loans held for investment |  | $ 125,894,443 |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ 113,025,790 |  |  |  |  |  |
Policy and other loans at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 7,187,804 |  |  |  |  |  |
Other loans |  | 32,809,669 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (813,223) |  |  |  |  |  |
Total policy and other loans at amortized cost |  | $ 39,184,250 |  |  |  |  |  |
Short-term investments at amortized cost |  | $ 20,620,236 |  |  |  |  |  |
The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2014 are summarized as follows:
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
December 31, 2014: |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity carried at amortized cost: |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 1,873,146 |  | $ 345,715 |  | $ - |  | $ 2,218,861
Obligations of states and political subdivisions |  | 1,736,489 |  | 221,893 |  | (5,278) |  | 1,953,104
Corporate securities including public utilities |  | 126,533,483 |  | 15,841,536 |  | (980,357) |  | 141,394,662
Mortgage-backed securities |  | 4,263,206 |  | 305,381 |  | (11,894) |  | 4,556,693
Redeemable preferred stock |  | 612,023 |  | 22,032 |  | - |  | 634,055
Total fixed maturity securities held to maturity |  | $ 135,018,347 |  | $ 16,736,557 |  | $ (997,529) |  | $ 150,757,375
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
December 31, 2014: |  |  |  |  |  |  |  |
Equity securities available for sale at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 7,179,010 |  | $ 393,873 |  | $ (820,133) |  | $ 6,752,750
Total securities available for sale carried at estimated fair value |  | $ 7,179,010 |  | $ 393,873 |  | $ (820,133) |  | $ 6,752,750
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 53,592,433 |  |  |  |  |  |
Residential construction |  | 33,071,938 |  |  |  |  |  |
Commercial |  | 35,388,756 |  |  |  |  |  |
Less: Allowance for loan losses |  | (2,003,055) |  |  |  |  |  |
Total mortgage loans on real estate and construction loans held for investment |  | $ 120,050,072 |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ 111,411,351 |  |  |  |  |  |
Policy and other loans at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 7,011,012 |  |  |  |  |  |
Other loans |  | 27,807,829 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (693,413) |  |  |  |  |  |
Total policy and other loans at amortized cost |  | $ 34,125,428 |  |  |  |  |  |
Short-term investments at amortized cost |  | $ 27,059,495 |  |  |  |  |  |
Fixed Maturity Securities The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at March 31, 2015 and December 31, 2014. 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 March 31 2015 |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ - |  |  |  | $ 4,322 |  | 1 |  | $ 4,322
Corporate securities including public utilities |  | 566,310 |  | 23 |  | 263,781 |  | 10 |  | 830,091
Mortgage-backed securities |  | 467 |  | 1 |  | - |  |  |  | 467
Total unrealized losses |  | $ 566,777 |  | 24 |  | $ 268,103 |  | 11 |  | $ 834,880
Fair Value |  | $ 9,346,785 |  |  |  | $ 2,522,624 |  |  |  | $ 11,869,409
At December 31, 2014 |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ - |  | 0 |  | $ 5,278 |  | 1 |  | $ 5,278
Corporate securities including public utilities |  | 548,310 |  | 21 |  | 432,047 |  | 11 |  | 980,357
Mortgage-backed securities |  | 3,966 |  | 1 |  | 7,928 |  | 1 |  | 11,894
Total unrealized losses |  | $ 552,276 |  | 22 |  | $ 445,253 |  | 13 |  | $ 997,529
Fair Value |  | $ 7,081,352 |  |  |  | $ 2,777,587 |  |  |  | $ 9,858,939
As of March 31, 2015, the average market value of the related fixed maturities was 93.4% of amortized cost and the average market value was 90.8% of amortized cost as of December 31, 2014. During the three months ended March 31, 2015 and 2014 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $30,000 for each reporting period. 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 March 31, 2015 and December 31, 2014. 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 March 31, 2015 |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 461,641 |  | 158 |  | $ 548,973 |  | 28 |  | $ 1,010,614
Total unrealized losses |  | $ 461,641 |  | 158 |  | $ 548,973 |  | 28 |  | $ 1,010,614
Fair Value |  | $ 2,444,324 |  |  |  | $ 609,689 |  |  |  | $ 3,054,013
At December 31, 2014 |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 327,389 |  | 138 |  | $ 492,744 |  | 27 |  | $ 820,133
Total unrealized losses |  | $ 327,389 |  | 138 |  | $ 492,744 |  | 27 |  | $ 820,133
Fair Value |  | $ 2,162,425 |  |  |  | $ 676,706 |  |  |  | $ 2,839,131
As of March 31, 2015, the average market value of the equity securities available for sale was 75.1% of the original investment and the average market value was 77.6% of the original investment as of December 31, 2014. 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 months ended March 31, 2015 and 2014, an other than temporary decline in the fair value resulted in the recognition of an impairment loss on equity securities of $25,896 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. 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 March 31, 2015, 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 2015 |  | $ 3,816,196 |  | $ 3,880,262
Due in 2016 through 2019 |  | 33,339,908 |  | 36,890,422
Due in 2020 through 2024 |  | 25,469,059 |  | 28,347,845
Due after 2024 |  | 66,174,756 |  | 76,349,947
Mortgage-backed securities |  | 3,859,088 |  | 4,170,601
Redeemable preferred stock |  | 612,023 |  | 647,960
Total held to maturity |  | $ 133,271,030 |  | $ 150,287,037
The amortized cost and estimated fair value of available for sale securities at March 31, 2015, 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: |  |  |  |
Common stock |  | $ 7,095,225 |  | $ 6,383,502
Total available for sale |  | $ 7,095,225 |  | $ 6,383,502
The Company’s realized gains and losses, other than temporary impairments from investments and other assets, are summarized as follows:
|  | Three Months Ended March 31
|  | 2015 |  | 2014
Fixed maturity securities held to maturity: |  |  |  |
Gross realized gains |  | $ 85,997 |  | $ -
Gross realized losses |  | (9,776) |  | -
Other than temporary impairments |  | (30,000) |  | (30,000)
Securities available for sale: |  |  |  |
Gross realized gains |  | 87,720 |  | 53,253
Gross realized losses |  | (1,016) |  | -
Other than temporary impairments |  | (25,896) |  | -
Other assets: |  |  |  |
Gross realized gains |  | 257,139 |  | 145,740
Gross realized losses |  | - |  | -
Other than temporary impairments |  | - |  | -
Total |  | $ 364,168 |  | $ 168,993
The net carrying amount of held to maturity securities sold was $257,962 and $-0- for the three months ended March 31, 2015 and 2014, respectively. The net realized gain related to these sales was $8,962 and $-0- for the three months ended March 31, 2015 and 2014, respectively. 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 March 31, 2015, other than investments issued or guaranteed by the United States Government. Major categories of net investment income are as follows:
| Three Months Ended March 31
| 2015 |  | 2014
Fixed maturity securities | $ 1,980,696 |  | $ 2,109,121
Equity securities | 59,418 |  | 39,247
Mortgage loans on real estate | 1,850,626 |  | 1,552,110
Real estate | 1,623,741 |  | 1,689,595
Policy and other loans | 188,546 |  | 197,568
Short-term investments, principally gains on sale of mortgage loans and other | 4,225,785 |  | 1,899,113
Gross investment income | 9,928,812 |  | 7,486,754
Investment expenses | (2,105,968) |  | (1,844,254)
Net investment income | $ 7,822,844 |  | $ 5,642,500
Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $92,922 and $94,745 for the three months ended March 31, 2015 and 2014, respectively. Net investment income on real estate consists primarily of rental revenue. 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 $9,310,227 at March 31, 2015 and $8,886,001 at December 31, 2014. 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 March 31, 2015, the Company had 39%, 19%, 13%, 8%, and 6% of its mortgage loans from borrowers located in the states of Utah, California, Texas, Florida, 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 $1,902,396 and $2,003,055 at March 31, 2015 and December 31, 2014, respectively. 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
March 31, 2015 |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |
Beginning balance - January 1, 2015 | $ 187,129 |  | $ 1,715,812 |  | $ 100,114 |  | $ 2,003,055
Charge-offs | - |  | - |  | - |  | -
Provision | - |  | (100,659) |  | - |  | (100,659)
Ending balance -March 31, 2015 | $ 187,129 |  | $ 1,615,153 |  | $ 100,114 |  | $ 1,902,396
Ending balance: individually evaluated for impairment | $ - |  | $ 245,952 |  | $ - |  | $ 245,952
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,369,201 |  | $ 100,114 |  | $ 1,656,444
Ending balance: loans acquired with deteriorated credit quality | $ - |  | $ - |  | $ - |  | $ -
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 46,067,130 |  | $ 52,045,350 |  | $ 29,684,359 |  | $ 127,796,839
Ending balance: individually evaluated for impairment | $ - |  | $ 2,544,731 |  | $ - |  | $ 2,544,731
Ending balance: collectively evaluated for impairment | $ 46,067,130 |  | $ 49,500,619 |  | $ 29,684,359 |  | $ 125,252,108
Ending balance: loans acquired with deteriorated credit quality | $ - |  | $ - |  | $ - |  | $ -
December 31, 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 | - |  | 389,409 |  | - |  | 389,409
Ending balance - December 31, 2014 | $ 187,129 |  | $ 1,715,812 |  | $ 100,114 |  | $ 2,003,055
Ending balance: individually evaluated for impairment | $ - |  | $ 153,446 |  | $ - |  | $ 153,446
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,562,366 |  | $ 100,114 |  | $ 1,849,609
Ending balance: loans acquired with deteriorated credit quality | $ - |  | $ - |  | $ - |  | $ -
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 35,388,756 |  | $ 53,592,433 |  | $ 33,071,938 |  | $ 122,053,127
Ending balance: individually evaluated for impairment | $ - |  | $ 1,556,182 |  | $ 414,499 |  | $ 1,970,681
Ending balance: collectively evaluated for impairment | $ 35,388,756 |  | $ 52,036,251 |  | $ 32,657,439 |  | $ 120,082,446
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
March 31, 2015 |  |  |  |  |  |  |  |
Commercial | $ - | $ 272,934 | $ - | $ - | $ 272,934 | $ 45,794,196 | $ 46,067,130 | $ (187,129) | $ 45,880,001
Residential | 1,092,140 | 706,753 | 4,107,831 | 2,544,731 | 8,451,455 | 43,593,895 | 52,045,350 | (1,615,153) | 50,430,197
Residential Construction | - | 25,049 | 64,895 | - | 89,944 | 29,594,415 | 29,684,359 | (100,114) | 29,584,245
Total | $ 1,092,140 | $ 1,004,736 | $ 4,172,726 | $ 2,544,731 | $ 8,814,333 | $ 118,982,506 | $ 127,796,839 | $ (1,902,396) | $ 125,894,443
December 31, 2014 |  |  |  |  |  |  |  |
Commercial | $ - | $ - | $ - | $ - | $ - | $ 35,388,756 | $ 35,388,756 | $ (187,129) | $ 35,201,627
Residential | 1,631,142 | 1,174,516 | 5,464,901 | 1,556,182 | 9,826,741 | 43,765,692 | 53,592,433 | (1,715,812) | 51,876,621
Residential Construction | - | - | 64,895 | 414,499 | 479,394 | 32,592,544 | 33,071,938 | (100,114) | 32,971,824
Total | $ 1,631,142 | $ 1,174,516 | $ 5,529,796 | $ 1,970,681 | $ 10,306,135 | $ 111,746,992 | $ 122,053,127 | $ (2,003,055) | $ 120,050,072
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
March 31, 2015 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | - |  | - |  | - |  | - |  | -
Residential construction | - |  | - |  | - |  | - |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 2,544,731 |  | 2,544,731 |  | 245,952 |  | 2,544,731 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 2,544,731 |  | 2,544,731 |  | 245,952 |  | 2,544,731 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
December 31, 2014 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | - |  | - |  | - |  | - |  | -
Residential construction | 414,499 |  | 414,499 |  | - |  | 414,499 |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 1,556,182 |  | 1,556,182 |  | 153,446 |  | 1,556,182 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 1,556,182 |  | 1,556,182 |  | 153,446 |  | 1,556,182 |  | -
Residential construction | 414,499 |  | 414,499 |  | - |  | 414,499 |  | -
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
| March 31, 2015 |  | December 31, 2014 |  | March 31, 2015 |  | December 31, 2014 |  | March 31, 2015 |  | December 31, 2014 |  | March 31, 2015 |  | December 31, 2014
Performing | $ 46,067,130 |  | $ 35,388,756 |  | $ 45,392,788 |  | $ 46,571,350 |  | $ 29,619,464 |  | $ 32,592,544 |  | $ 121,079,382 |  | $ 114,552,650
Nonperforming | - |  | - |  | 6,652,562 |  | 7,021,083 |  | 64,895 |  | 479,394 |  | 6,717,457 |  | 7,500,477
Total | $ 46,067,130 |  | $ 35,388,756 |  | $ 52,045,350 |  | $ 53,592,433 |  | $ 29,684,359 |  | $ 33,071,938 |  | $ 127,796,839 |  | $ 122,053,127
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 $534,000 and $535,000 as of March 31, 2015 and December 31, 2014, respectively. The following is a summary of mortgage loans on a nonaccrual status for the periods presented.
| Mortgage Loans on Nonaccrual Status
| As of March 31 2015 |  | As of December 31 2014
Residential | $ 6,652,562 |  | $ 7,021,083
Residential construction | 64,895 |  | 479,394
Total | $ 6,717,457 |  | $ 7,500,477
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 March 31 2015 |  | As of December 31 2014
Balance, beginning of period | $ 1,718,150 |  | $ 5,506,532
Provisions for losses | 666,739 |  | 3,053,403
Charge-offs | (173,106) |  | (6,841,785)
Balance, end of period | $ 2,211,783 |  | $ 1,718,150
The Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date. Actual loan loss experience could change, in the near-term, from the established reserve based upon claims that could be asserted by third party investors. SecurityNational Mortgage believes there is potential to resolve any alleged claims by third party investors on acceptable terms. If SecurityNational Mortgage is unable to resolve such claims on acceptable terms, legal action may ensue. In the event of legal action by any third party investor, SecurityNational Mortgage believes it has significant defenses to any such action and intends to vigorously defend itself against such action.

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