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3) Investments | 6 Months Ended
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Jun. 30, 2017
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, 2017 are summarized as follows:
|  | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
June 30, 2017 |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity carried at amortized cost: |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 14,420,200 |  | $ 248,373 |  | $ (59,763) |  | $ 14,608,810
Obligations of states and political subdivisions |  | 5,973,209 |  | 130,535 |  | (89,335) |  | 6,014,409
Corporate securities including public utilities |  | 161,579,151 |  | 13,657,535 |  | (2,170,322) |  | 173,066,364
Mortgage-backed securities |  | 10,612,465 |  | 238,013 |  | (159,091) |  | 10,691,387
Redeemable preferred stock |  | 623,635 |  | 39,838 |  | - |  | 663,473
Total fixed maturity securities held to maturity |  | $ 193,208,660 |  | $ 14,314,294 |  | $ (2,478,511) |  | $ 205,044,443
Equity securities available for sale at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 6,969,968 |  | $ 388,504 |  | $ (859,372) |  | $ 6,499,100
Total equity securities available for sale at estimated fair value |  | $ 6,969,968 |  | $ 388,504 |  | $ (859,372) |  | $ 6,499,100
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 63,031,000 |  |  |  |  |  |
Residential construction |  | 34,512,524 |  |  |  |  |  |
Commercial |  | 39,763,788 |  |  |  |  |  |
Less: Unamortized deferred loan fees, net |  | (387,020) |  |  |  |  |  |
Less: Allowance for loan losses |  | (1,921,028) |  |  |  |  |  |
Total mortgage loans on real estate and construction loans held for investment |  | $ 134,999,264 |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ 151,355,029 |  |  |  |  |  |
Policy loans and other investments are shown at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 6,685,452 |  |  |  |  |  |
Insurance assignments |  | 32,450,071 |  |  |  |  |  |
Other investments |  | 2,925,000 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (1,072,529) |  |  |  |  |  |
Total policy loans and other investments |  | $ 40,987,994 |  |  |  |  |  |
Short-term investments at amortized cost |  | $ 23,448,480 |  |  |  |  |  |
The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2016 are summarized as follows:
|  | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
December 31, 2016: |  |  |  |  |  |  |  |
Fixed maturity securities held to maturity carried at amortized cost: |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 4,475,065 |  | $ 249,028 |  | $ (66,111) |  | $ 4,657,982
Obligations of states and political subdivisions |  | 6,017,225 |  | 153,514 |  | (133,249) |  | 6,037,490
Corporate securities including public utilities |  | 164,375,636 |  | 10,440,989 |  | (3,727,013) |  | 171,089,612
Mortgage-backed securities |  | 9,488,083 |  | 221,400 |  | (280,871) |  | 9,428,612
Redeemable preferred stock |  | 623,635 |  | 13,418 |  | - |  | 637,053
Total fixed maturity securities held to maturity |  | $ 184,979,644 |  | $ 11,078,349 |  | $ (4,207,244) |  | $ 191,850,749
Equity securities available for sale at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 10,985,338 |  | $ 447,110 |  | $ (859,092) |  | $ 10,573,356
Total securities available for sale carried at estimated fair value |  | $ 10,985,338 |  | $ 447,110 |  | $ (859,092) |  | $ 10,573,356
Mortgage loans on real estate and construction loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 58,593,622 |  |  |  |  |  |
Residential construction |  | 40,800,117 |  |  |  |  |  |
Commercial |  | 51,536,622 |  |  |  |  |  |
Less: Allowance for loan losses |  | (1,748,783) |  |  |  |  |  |
Total mortgage loans on real estate and construction loans held for investment |  | $ 149,181,578 |  |  |  |  |  |
Real estate held for investment - net of depreciation |  | $ 145,165,921 |  |  |  |  |  |
Policy loans and other investments are shown at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 6,694,148 |  |  |  |  |  |
Insurance assignments |  | 33,548,079 |  |  |  |  |  |
Promissory notes |  | 48,797 |  |  |  |  |  |
Other investments |  | 1,765,752 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (1,119,630) |  |  |  |  |  |
Total policy loans and other investments |  | $ 40,937,146 |  |  |  |  |  |
Short-term investments at amortized cost |  | $ 27,560,040 |  |  |  |  |  |
Fixed Maturity Securities The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at June 30, 2017 and December 31, 2016. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:
|  | Unrealized Losses for Less than Twelve Months |  | Fair Value |  | Unrealized Losses for More than Twelve Months |  | Fair Value |  | Total Unrealized Loss | Fair Value
At June 30, 2017 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Securities and Obligations of U.S. Government Agencies |  | $ 59,763 |  | $ 12,614,366 |  | $ - |  | $ - |  | $ 59,763 | $ 12,614,366
Obligations of states and political subdivisions |  | 89,335 |  | 2,964,864 |  | - |  | - |  | 89,335 | 2,964,864
Corporate securities |  | 696,803 |  | 19,580,014 |  | 1,473,519 |  | 11,365,599 |  | 2,170,322 | 30,945,613
Mortgage-backed securities |  | 99,586 |  | 2,845,871 |  | 59,505 |  | 1,097,380 |  | 159,091 | 3,943,251
Total unrealized losses |  | $ 945,487 |  | $ 38,005,115 |  | $ 1,533,024 |  | $ 12,462,979 |  | $ 2,478,511 | $ 50,468,094
At December 31, 2016 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Securities and Obligations of U.S. Government Agencies |  | $ 66,111 |  | $ 1,342,088 |  | $ - |  | $ - |  | $ 66,111 | $ 1,342,088
Obligations of states and political subdivisions |  | 133,249 |  | 3,686,856 |  | - |  | - |  | 133,249 | 3,686,856
Corporate securities |  | 1,728,312 |  | 41,796,016 |  | 1,998,701 |  | 12,969,135 |  | 3,727,013 | 54,765,151
Mortgage-backed securities |  | 176,715 |  | 4,176,089 |  | 104,156 |  | 940,278 |  | 280,871 | 5,116,367
Total unrealized losses |  | $ 2,104,387 |  | $ 51,001,049 |  | $ 2,102,857 |  | $ 13,909,413 |  | $ 4,207,244 | $ 64,910,462
There were 151 securities with an average fair value of 95.3% of amortized cost at June 30, 2017. There were 250 securities with unrealized losses of 93.9% of amortized cost at December 31, 2016. During the three months ended June 30, 2017 and 2016 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $266,227 and $30,000, respectively, and for the six months ended June 30, 2017 and 2016 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $318,366 and $60,000, respectively. On a quarterly basis, the Company reviews its available for sale and held to maturity 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. The amortized cost and estimated fair value of fixed maturity securities at June 30, 2017, 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 2017 |  | $ 2,711,324 |  | $ 2,725,318
Due in 2018 through 2021 |  | 50,865,992 |  | 52,437,835
Due in 2022 through 2026 |  | 43,504,148 |  | 45,811,635
Due after 2026 |  | 84,891,096 |  | 92,714,795
Mortgage-backed securities |  | 10,612,465 |  | 10,691,387
Redeemable preferred stock |  | 623,635 |  | 663,473
Total held to maturity |  | $ 193,208,660 |  | $ 205,044,443
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, 2017 and December 31, 2016. 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, 2017 |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 175,601 |  | 137 |  | $ 683,771 |  | 84 |  | $ 859,372
Total unrealized losses |  | $ 175,601 |  | 137 |  | $ 683,771 |  | 84 |  | $ 859,372
Fair Value |  | $ 1,275,336 |  |  |  | $ 1,298,109 |  |  |  | $ 2,573,445
At December 31, 2016 |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 215,563 |  | 124 |  | $ 643,529 |  | 104 |  | $ 859,092
Total unrealized losses |  | $ 215,563 |  | 124 |  | $ 643,529 |  | 104 |  | $ 859,092
Fair Value |  | $ 2,063,144 |  |  |  | $ 1,685,874 |  |  |  | $ 3,749,018
The average fair value of the equity securities available for sale was 75.0% and 81.4% of the original investment as of June 30, 2017 and December 31, 2016, respectively. 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 June 30, 2017 and 2016, an other than temporary decline in the fair value resulted in the recognition of no impairment loss on equity securities and for the six months ended June 30, 2017 and 2016, an other than temporary decline in the fair value resulted in the recognition of an impairment loss on equity securities of $-0- and $43,630, 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 Company’s net realized gains and losses and other than temporary impairments from investments and other assets, are summarized as follows:
|  | Three Months Ended June 30 |  | Six Months Ended June 30
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Fixed maturity securities held to maturity: |  |  |  |  |  |  |  |
Gross realized gains |  | $ 50,987 |  | $ 194,456 |  | $ 53,422 |  | $ 194,456
Gross realized losses |  | (35,066) |  | - |  | (35,066) |  | (2,878)
Other than temporary impairments |  | (266,227) |  | (30,000) |  | (318,366) |  | (60,000)
Equity securities available for sale: |  |  |  |  |  |  |  |
Gross realized gains |  | 45,474 |  | 76,085 |  | 106,452 |  | 139,580
Gross realized losses |  | (53,881) |  | (8,724) |  | (58,437) |  | (32,602)
Other than temporary impairments |  |  |  | - |  | - |  | (43,630)
Other assets: |  |  |  |  |  |  |  |
Gross realized gains |  | 1,325,424 |  | 583,688 |  | 1,781,698 |  | 866,283
Gross realized losses |  | (445,536) |  | (724,962) |  | (815,337) |  | (946,374)
Total |  | $ 621,175 |  | $ 90,543 |  | $ 714,366 |  | $ 114,835
The carrying amount of held to maturity securities sold was $255,509 and $1,789,159 for the six months ended June 30, 2017 and 2016, respectively. The net realized gain related to these sales was $39,374 and $156,171 for the six months ended June 30, 2017 and 2016, respectively. Although the intent is to buy and hold a bond to maturity the Company will sell a bond prior to maturity if conditions have changed within the entity that issued the bond to increase the risk of default to an unacceptable level. There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on available for sale equity securities) at June 30, 2017, 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
| 2017 |  | 2016 |  | 2017 |  | 2016
Fixed maturity securities | $ 2,433,404 |  | $ 2,011,637 |  | $ 4,792,364 |  | $ 4,062,206
Equity securities | 68,868 |  | 59,252 |  | 133,403 |  | 130,293
Mortgage loans on real estate | 2,128,345 |  | 2,295,531 |  | 4,340,521 |  | 4,306,506
Real estate | 2,834,022 |  | 2,587,789 |  | 5,722,084 |  | 5,426,272
Policy loans | 233,021 |  | 171,035 |  | 426,755 |  | 353,241
Insurance assignments | 3,100,721 |  | 2,946,375 |  | 6,382,333 |  | 5,963,484
Other investments | 12,448 |  | 13,962 |  | 19,990 |  | 13,962
Short-term investments, principally interest on sale of mortgage loans and other | 1,988,945 |  | 2,001,301 |  | 3,804,548 |  | 3,879,983
Gross investment income | 12,799,774 |  | 12,086,882 |  | 25,621,998 |  | 24,135,947
Investment expenses | (3,052,299) |  | (2,951,062) |  | (6,311,241) |  | (6,007,936)
Net investment income | $ 9,747,475 |  | $ 9,135,820 |  | $ 19,310,757 |  | $ 18,128,011
Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $124,983 and $74,365 for the three months ended June 30, 2017 and 2016, respectively, and $240,485 and $162,341 for the six months ended June 30, 2017 and 2016, 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 $9,267,402 at June 30, 2017 and $9,269,121 at December 31, 2016. The restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets. Real Estate The Company continues to strategically deploy resources into real estate to match the income and yield durations of its primary obligations. The sources for these real estate assets come through its various business units in the form of acquisition, development mortgage foreclosures. Commercial Real Estate Held for Investment The Company owns and manages commercial real estate assets as a means of generating investment income. These assets are acquired in accordance with the Company’s goals and objectives for risk-adjusted returns. Due diligence is conducted on each asset using internal and third-party reports. Geographic locations and asset classes of the investment activity is determined by senior management under the direction of the Board of Directors. The Company employs full-time employees to attend to the day-to-day operations of those assets within the greater Salt Lake area and close surrounding markets. The Company utilizes third party property managers when the geographic boundary does not warrant full-time staff or through strategic lease-up periods. The Company generally looks to acquire assets in regions that are high growth regions for employment and population and in assets that provide operational efficiencies. The Company currently owns and operates 12 commercial properties in 7 states. These properties include industrial warehouses, office buildings, retail centers, undeveloped land and includes the redevelopment and expansion of its corporate campus in Salt Lake City, Utah. The assets are primarily held without debt; however, the Company does use debt in strategic cases to leverage established yields or to acquire higher quality or different class of asset. The following is a summary of the Company’s investment in commercial real estate for the periods presented:
|  | Net Ending Balance |  | Total Square Footage
|  | June 30 |  | December 31 |  | June 30 |  | December 31
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Arizona |  | $ 4,000 | (1) | $ 450,538 | (1) | - |  | 16,270
Arkansas |  | 98,269 |  | 100,369 |  | 3,200 |  | 3,200
Kansas |  | 12,101,659 |  | 12,450,297 |  | 222,679 |  | 222,679
Louisiana |  | 505,948 |  | 518,700 |  | 7,063 |  | 7,063
Mississippi |  | 3,771,725 |  | 3,818,985 |  | 33,821 |  | 33,821
New Mexico |  | 7,000 | (1) | 7,000 | (1) | - |  | -
Texas |  | 3,744,730 |  | 3,734,974 |  | 23,470 |  | 23,470
Utah |  | 59,851,183 | (2) | 47,893,073 | (2) | 433,244 |  | 433,244
|  | $ 80,084,514 |  | $ 68,973,936 |  | 723,477 |  | 739,747
(1) Includes undeveloped land |  |  |  |  |
(2) Includes 53rd Center completed in July 2017 |  |  |  |
Residential Real Estate Held for Investment The Company owns a portfolio of residential homes primarily as a result of loan foreclosures. The strategy has been to lease these homes to produce cash flow, and allow time for the economic fundamentals to return to the various markets. As an orderly and active market for these homes returns, the Company has the option to dispose or to continue and hold them for cash flow and acceptable returns. The Company established Security National Real Estate Services (“SNRE”) to manage the residential portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across the country. As of June 30, 2017, SNRE manages 112 residential properties in 9 states across the United States which includes a newly constructed apartment complex, Dry Creek at East Village, in Sandy Utah. The following is a summary of the Company’s investment in residential real estate for the periods presented:
|  | Net Ending Balance
|  | June 30 |  | December 31
|  | 2017 |  | 2016
Arizona |  | $ 534,381 |  | $ 742,259
California |  | 5,621,924 |  | 5,848,389
Colorado |  | - |  | 364,489
Florida |  | 7,462,137 |  | 8,327,355
Hawaii |  | 712,286 |  | -
Ohio |  | 46,658 |  | 46,658
Oklahoma |  | 17,500 |  | -
Texas |  | 513,962 |  | 1,091,188
Utah |  | 56,075,486 |  | 59,485,466
Washington |  | 286,181 |  | 286,181
|  | $ 71,270,515 |  | $ 76,191,985
Real Estate Owned and Occupied by the Company The primary business units of the Company occupy a portion of the real estate owned by the Company. Currently, the Company occupies nearly 80,000 square feet, or approximately 10% of the overall commercial real estate holdings. As of June 30, 2017, real estate owned and occupied by the company is summarized as follows:
Location |  | Business Segment |  | Approximate Square Footage |  | Square Footage Occupied by the Company
5300 South 360 West, Salt Lake City, UT (1) |  | Corporate Offices, Life Insurance and Cemetery/Mortuary Operations |  | 36,000 |  | 100%
5201 Green Street, Salt Lake City, UT |  | Mortgage Operations |  | 36,899 |  | 34%
1044 River Oaks Dr., Flowood, MS |  | Life Insurance Operations |  | 5,522 |  | 27%
(1) This asset is included in property and equipment on the Condensed Consolidated Balance Sheet |  |
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 June 30, 2017, the Company had 42%, 15%, 11%, 8%, 6%, 4% and 3% of its mortgage loans from borrowers located in the states of Utah, California, Texas, Florida, Arizona, Tennessee, and Nevada respectively. The mortgage loans on real estate balances on the Condensed Consolidated Balance Sheet are reflected net of an allowance for loan losses of $1,921,028 and $1,748,783 at June 30, 2017 and December 31, 2016, 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, 2017 |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |
Beginning balance - January 1, 2017 | $ 187,129 |  | $ 1,461,540 |  | $ 100,114 |  | $ 1,748,783
Charge-offs | - |  | (49,775) |  | (64,894) |  | (114,669)
Provision | - |  | 286,914 |  | - |  | 286,914
Ending balance - June 30, 2017 | $ 187,129 |  | $ 1,698,679 |  | $ 35,220 |  | $ 1,921,028
Ending balance: individually evaluated for impairment | $ - |  | $ 397,938 |  | $ - |  | $ 397,938
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,300,741 |  | $ 35,220 |  | $ 1,523,090
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 39,763,788 |  | $ 63,031,000 |  | $ 34,512,524 |  | $ 137,307,312
Ending balance: individually evaluated for impairment | $ 1,216,035 |  | $ 5,092,895 |  | $ 375,233 |  | $ 6,684,163
Ending balance: collectively evaluated for impairment | $ 38,547,753 |  | $ 57,938,105 |  | $ 34,137,291 |  | $ 130,623,149
December 31, 2016 |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |
Beginning balance - January 1, 2016 | $ 187,129 |  | $ 1,560,877 |  | $ 100,114 |  | $ 1,848,120
Charge-offs | - |  | (420,135) |  | - |  | (420,135)
Provision | - |  | 320,798 |  | - |  | 320,798
Ending balance - December 31, 2016 | $ 187,129 |  | $ 1,461,540 |  | $ 100,114 |  | $ 1,748,783
Ending balance: individually evaluated for impairment | $ - |  | $ 374,501 |  | $ - |  | $ 374,501
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,087,039 |  | $ 100,114 |  | $ 1,374,282
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 51,536,622 |  | $ 58,593,622 |  | $ 40,800,117 |  | $ 150,930,361
Ending balance: individually evaluated for impairment | $ 202,992 |  | $ 2,916,538 |  | $ 64,895 |  | $ 3,184,425
Ending balance: collectively evaluated for impairment | $ 51,333,630 |  | $ 55,677,084 |  | $ 40,735,222 |  | $ 147,745,936
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 Process of Foreclosure (1) | Total Past Due | Current | Total Mortgage Loans | Allowance for Loan Losses | Unamortized deferred loan fees, net | Net Mortgage Loans
June 30, 2017 |  |  |  |  |  |  |  |  |  |
Commercial | $ 522,607 | $ - | $ 1,012,500 | $ 203,535 | $ 1,738,642 | $ 38,025,146 | $ 39,763,788 | $ (187,129) | $ (184,983) | $ 39,391,676
Residential | 23,047 | 2,648,068 | 2,599,697 | 2,493,198 | 7,764,010 | 55,266,990 | 63,031,000 | (1,698,679) | (25,640) | 61,306,681
Residential Construction | - | - | 375,233 | - | 375,233 | 34,137,291 | 34,512,524 | (35,220) | (176,397) | 34,300,907
Total | $ 545,654 | $ 2,648,068 | $ 3,987,430 | $ 2,696,733 | $ 9,877,885 | $ 127,429,427 | $ 137,307,312 | $ (1,921,028) | $ (387,020) | $ 134,999,264
December 31, 2016 |  |  |  |  |  |  |  |  |
Commercial | $ - | $ - | $ - | $ 202,992 | $ 202,992 | $ 51,333,630 | $ 51,536,622 | $ (187,129) | $ - | $ 51,349,493
Residential | 964,960 | 996,779 | 1,290,355 | 1,626,183 | 4,878,277 | 53,715,345 | 58,593,622 | (1,461,540) | - | 57,132,082
Residential Construction | - | - | 64,895 | - | 64,895 | 40,735,222 | 40,800,117 | (100,114) | - | 40,700,003
Total | $ 964,960 | $ 996,779 | $ 1,355,250 | $ 1,829,175 | $ 5,146,164 | $ 145,784,197 | $ 150,930,361 | $ (1,748,783) | $ - | $ 149,181,578
(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, 2017 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ 1,216,035 |  | $ 1,216,035 |  | $ - |  | $ 709,514 |  | $ -
Residential | - |  | - |  | - |  | - |  | -
Residential construction | 375,233 |  | 375,233 |  | - |  | 220,064 |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 5,092,895 |  | 5,092,895 |  | 397,938 |  | 4,004,717 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $ 1,216,035 |  | $ 1,216,035 |  | $ - |  | $ 709,514 |  | $ -
Residential | 5,092,895 |  | 5,092,895 |  | 397,938 |  | 4,004,717 |  | -
Residential construction | 375,233 |  | 375,233 |  | - |  | 220,064 |  | -
December 31, 2016 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ 202,992 |  | $ 202,992 |  | $ - |  | $ 202,992 |  | $ -
Residential | - |  | - |  | - |  | - |  | -
Residential construction | 64,895 |  | 64,895 |  | - |  | 79,082 |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 2,916,538 |  | 2,916,538 |  | 374,501 |  | 3,001,850 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $202,992 |  | $202,992 |  | $- |  | $202,992 |  | $ -
Residential | 2,916,538 |  | 2,916,538 |  | 374,501 |  | 3,001,850 |  | -
Residential construction | 64,895 |  | 64,895 |  | - |  | 79,082 |  | -
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
| Commercial |  | Residential |  | Residential Construction |  | Total
| June 30, 2017 |  | December 31, 2016 |  | June 30, 2017 |  | December 31, 2016 |  | June 30, 2017 |  | December 31, 2016 |  | June 30, 2017 |  | December 31, 2016
Performing | $ 38,547,753 |  | $ 51,333,630 |  | $ 57,938,105 |  | $ 55,677,084 |  | $ 34,137,291 |  | $ 40,735,222 |  | $ 130,623,149 |  | $ 147,745,936
Nonperforming | 1,216,035 |  | 202,992 |  | 5,092,895 |  | 2,916,538 |  | 375,233 |  | 64,895 |  | 6,684,163 |  | 3,184,425
Total | $ 39,763,788 |  | $ 51,536,622 |  | $ 63,031,000 |  | $ 58,593,622 |  | $ 34,512,524 |  | $ 40,800,117 |  | $ 137,307,312 |  | $ 150,930,361
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 approximately $106,000 and $172,000 as of June 30, 2017 and December 31, 2016, 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 2017 |  | As of December 31 2016
Commercial | $ 1,216,035 |  | $ 202,992
Residential | 5,092,895 |  | 2,916,538
Residential construction | 375,233 |  | 64,895
Total | $ 6,684,163 |  | $ 3,184,425
Loan Loss Reserve When a repurchase demand corresponding to a mortgage loan previously sold to a third-party investor 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 2017 |  | As of December 31 2016
Balance, beginning of period | $ 627,733 |  | $ 2,805,900
Provision on current loan originations (1) | 953,453 |  | 2,988,754
Additional provision for loan loss reserve | - |  | 1,700,000
Charge-offs, net of recaptured amounts | (446,067) |  | (6,866,921)
Balance, end of period | $ 1,135,119 |  | $ 627,733
(1) Included in Mortgage fee income |  |  |
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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