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Note 6: Bank and Other Loans Payable

12 Months Ended

Dec. 31, 2016

Notes

Note 6: Bank and Other Loans Payable

6)         Bank and Other Loans Payable

Bank loans payable are summarized as follows:

		December 31
		2016 (As Restated)		2015 (As Restated)
1.65% above the monthly LIBOR rate (0.625% at December 31, 2016) note payable in monthly installments of $13,741 including principal and interest, collateralized by real property with a book value of approximately $498,000, due November 2017.		$      147,346		$      312,240
Mark to market of interest rate swaps (discussed below) adjustment		3,308		13,947
6.50% note payable in monthly installments of $1,702 including principal and interest, collateralized by real property with a book value of approximately $278,000, due October 2041.		251,072		-
2.25% above the monthly LIBOR rate (0.625% at December 31, 2016) plus 1/16th of the monthly LIBOR rate note payable in monthly principal payments of $13,167 plus interest, collateralized by real property with a book value of approximately $4,564,000, due October 2021.		3,133,787		3,260,266
3.85% note payable in monthly installments of $86,059 including principal and interest, collateralized by shares of Security National Life Insurance Company stock, due January 2018.		1,093,349		2,062,512
4.27% note payable in monthly installments of $53,881 including principal and interest, collateralized by shares of Security National Life Insurance Company stock, due November 2021.		2,904,354		-
4.40% note payable in monthly installments of $46,825 including principal and interest, collateralized by real property with a book value of approximately $12,060,000, due January 2026.		7,927,526		8,135,438
4.329% note payable in monthly installments of $9,775 including principal and interest, collateralized by real property with a book value of approximately $3,048,000, due September 2025.		1,992,056		2,020,993
2.5% above the monthly LIBOR rate (0.625% at December 31, 2016) plus 1/16th of the monthly LIBOR rate construction loan payable, collateralized by real property with a book value of approximately $31,835,000, due August 2019.		8,777,941		-
2.60% above 90 day LIBOR rate (0.99789% at December 31, 2016) note payable in monthly installments of approximately $123,800, collateralized by real property with a book value of approximately $35,798,000, due October 2019.		27,377,114		24,933,346
1 month LIBOR rate (0.625% at December 31, 2016) plus 3% loan purchase agreement with a warehouse line availability of $100,000,000, matures June 2018		76,843,180		61,302,069
1 month LIBOR rate (0.625% at December 31, 2016) plus 3% loan purchase agreement with a warehouse line availability of $100,000,000, matures September 2017		21,578,951		28,794,630
Other collateralized bank loans payable		109,734		169,212
Other notes payable		961		961
Total bank and other loans		152,140,679		131,005,614
Less current installments		101,177,574		119,734,751
Bank and other loans, excluding current installments		$ 50,963,105		$ 11,270,863

During 2001, the Company entered into an interest rate swap instrument that effectively fixed the interest rate on the note payable at 6.34% per annum. Management considers the interest rate swap instrument an effective cash flow hedge against the variable interest rate on the bank note since the interest rate swap mirrors the term of the note payable and expires on the maturity date of the bank loan it hedges. The interest rate swap is a derivative financial instrument carried at its fair value.

In the event the swap is terminated, any resulting gain or loss would be deferred and amortized to interest expense over the remaining life of the bank loan it hedged. In the event of early extinguishment of the hedged bank loan, any realized or unrealized gain or loss from the hedging swap would be recognized in income coincident with the extinguishment.

At December 31, 2016 and 2015, the fair value of the interest rate swap was an unrealized loss of $3,308 and $13,947, respectively, and was computed based on the underlying variable Libor rate plus 1.65%, or 2.65% per annum. The unrealized loss resulted in a derivative liability of $3,308 and $13,947 and has been reflected in accumulated other comprehensive income. The change in accumulated other comprehensive income from the interest rate swap in 2016 and 2015 was $10,639 and $17,423, respectively. The fair value of the interest rate swap was derived from a proprietary model of the bank from whom the interest rate swap was purchased and to whom the note is payable.

The Company has a $2,000,000 revolving line-of-credit with a bank with interest payable at the prime rate minus .75% (3.00% at December 31, 2016), secured by the capital stock of Security National Life and maturing September 30, 2017, renewable annually. At December 31, 2016, the Company was contingently liable under a standby letter of credit aggregating $560,350, to be used as collateral to cover any contingency related to additional risk assessments pertaining to the Company's captive insurance program and under a standby letter of credit aggregating $48,220 issued as a security deposit to guarantee payment of final bills for electric and gas utility services for a commercial real estate property owned by the Company in Wichita, Kansas. The Company does not expect any material losses to result from the issuance of the standby letter of credit because claims are not expected to exceed premiums paid. As of December 31, 2016, there were no amounts outstanding under the revolving line-of-credit.

The Company has a $2,500,000 revolving line-of-credit with a bank with interest payable at the overnight LIBOR rate plus 2.25% (2.9375% at December 31, 2016) maturing September 14, 2017. At December 31, 2016, SecurityNational Mortgage was contingently liable under a standby letter of credit aggregating $1,250,000, to be used as collateral to cover any contingency relating to claims filed in states where SecurityNational Mortgage is licensed. The Company does not expect any material losses to result from the issuance of the standby letters of credit. As of December 31, 2016, there were no amounts outstanding under the revolving line-of-credit.

The Company, through its subsidiary SecurityNational Mortgage, has a $100,000,000 line of credit with Wells Fargo Bank N.A. The agreement charges interest at the 1-Month LIBOR rate plus 3% and matures on June 16, 2018.   SecurityNational Mortgage is required to maintain an adjusted tangible net worth of $19,000,000, unrestricted cash of $10,000,000, indebtedness to adjusted tangible net worth of 12:1, liquidity overhead coverage of 1.75:1, and a quarterly gross profit of at least $1.

The Company, through its subsidiary SecurityNational Mortgage, also uses a line of credit with Texas Capital Bank N.A.   This agreement with the bank allows SecurityNational Mortgage to borrow up to $100,000,000 for the sole purpose of funding mortgage loans.  SecurityNational Mortgage is currently approved to borrow $30,000,000 of the $100,000,000 available.  The agreement charges interest at the 1-Month LIBOR rate plus 3% and matures on September 7, 2017. The Company is required to maintain an adjusted tangible net worth of $70,000,000, unrestricted cash of $15,000,000, and no two consecutive quarters with a net loss.

In addition to financial covenants of these agreements, the Company is required to carry insurance policies for errors and omissions and general liability and was in compliance with all debt covenants as of December 31, 2016.

The following tabulation shows the combined maturities of bank loans payable, lines of credit and notes and contracts payable:

2017	$     101,177,574
2018	1,539,638
2019	36,128,905
2020	1,066,254
2021	3,436,591
Thereafter	8,791,717
Total	$    152,140,679

Interest expense in 2016, 2015 and 2014 was $5,111,868, $4,458,612 and $2,994,429, respectively.

X

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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- References

No definition available.

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