XML 24 R11.htm IDEA: XBRL DOCUMENT

3) Investments

9 Months Ended

Sep. 30, 2018

The Company’s investments as of September 30, 2018 are summarized as follows:

	Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
September 30, 2018
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$ 53,683,435	$ 142,299	$ (1,248,029)	$ 52,577,705
Obligations of states and political subdivisions	6,987,405	40,224	(190,262)	6,837,367
Corporate securities including public utilities	155,372,733	7,544,943	(2,299,844)	160,617,832
Mortgage-backed securities	13,731,279	135,074	(323,564)	13,542,789
Redeemable preferred stock	612,023	36,437	-	648,460
Total fixed maturity securities held to maturity	$ 230,386,875	$ 7,898,977	$ (4,061,699)	$ 234,224,153


Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other	$ 5,891,712	$ 786,960	$ (689,754)	$ 5,988,918

Total equity securities at estimated fair value	$ 5,891,712	$ 786,960	$ (689,754)	$ 5,988,918

Mortgage loans held for investment at amortized cost:
Residential	$ 79,930,807
Residential construction	71,330,891
Commercial	32,869,447
Less: Unamortized deferred loan fees, net	(1,279,465)
Less: Allowance for loan losses	(1,470,158)
Total mortgage loans held for investment	$ 181,381,522

Real estate held for investment net of accumulated depreciation:
Residential	$ 26,988,179
Commercial	92,088,430
Total real estate held for investment	$ 119,076,609

Other investments and policy loans at amortized cost:
Policy loans	$ 6,389,122
Insurance assignments	32,166,750
Federal Home Loan Bank stock	2,308,700
Other investments	4,220,893
Less: Allowance for doubtful accounts	(1,046,840)

Total other investments and policy loans	$ 44,038,625

Accrued investment income	$ 3,751,942

Total investments	$ 584,624,491

The Company’s investments as of December 31, 2017 are summarized as follows:

	Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
December 31, 2017:

Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$ 54,077,069	$ 211,824	$ (579,423)	$ 53,709,470
Obligations of states and political subdivisions	5,843,176	112,372	(71,013)	5,884,535
Corporate securities including public utilities	158,350,727	14,336,452	(1,007,504)	171,679,675
Mortgage-backed securities	9,503,016	210,652	(162,131)	9,551,537
Redeemable preferred stock	623,635	49,748	(191)	673,192
Total fixed maturity securities held to maturity	$ 228,397,623	$ 14,921,048	$ (1,820,262)	$ 241,498,409


Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other	$ 6,002,931	$ 667,593	$ (632,669)	$ 6,037,855

Total equity securities at estimated fair value	$ 6,002,931	$ 667,593	$ (632,669)	$ 6,037,855


Mortgage loans held for investment at amortized cost:
Residential		$ 102,527,111
Residential construction		50,157,533
Commercial		54,954,865
Less: Unamortized deferred loan fees, net		(1,659,828)
Less: Allowance for loan losses		(1,768,796)

Total mortgage loans held for investment		$ 204,210,885

Real estate held for investment net of accumulated depreciation:
Residential		$ 68,329,917
Commercial		72,968,789
Total real estate held for investment		$ 141,298,706

Other investments and policy loans at amortized cost:
Policy loans		$ 6,531,352
Insurance assignments		36,301,739
Federal Home Loan Bank stock		689,400
Other investments		3,219,622
Less: Allowance for doubtful accounts		(846,641)

Total other investments and policy loans		$ 45,895,472


Accrued investment income		$ 3,644,077

Total investments		$ 629,484,618

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities held to maturity, which are carried at amortized cost, at September 30, 2018 and December 31, 2017. 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 September 30, 2018
U.S. Treasury securities and obligations of U.S. Government Agencies	$ 104,070	$ 9,996,147	$ 1,143,956	$ 41,197,425	$ 1,248,029	$ 51,193,572
Obligations of states and political subdivisions	46,178	2,447,348	144,084	2,644,649	190,262	5,091,997
Corporate securities	1,738,234	59,982,599	561,610	8,915,794	2,299,844	68,898,393
Mortgage and other asset-backed securities	51,253	6,780,302	272,311	2,352,453	323,564	9,132,755
Total unrealized losses	$ 1,939,735	$ 79,206,396	$ 2,121,961	$ 55,110,321	$ 4,061,699	$ 134,316,717


At December 31, 2017
U.S. Treasury securities and obligations of U.S. Government Agencies	$ 532,010	$ 51,606,699	$ 47,413	$ 643,380	$ 579,423	$ 52,250,079
Obligations of states and political subdivisions	296	214,882	70,717	2,225,021	71,013	2,439,903
Corporate securities	167,786	11,551,865	839,718	13,193,258	1,007,504	24,745,123
Mortgage and other asset-backed securities	56,756	2,516,660	105,375	1,676,494	162,131	4,193,154
Redeemable preferred stock	191	11,421	-	-	191	11,421
Total unrealized losses	$ 757,039	$ 65,901,527	$ 1,063,223	$ 17,738,153	$ 1,820,262	$ 83,639,680

There were 364 securities with fair value of 97.1% of amortized cost at September 30, 2018. There were 141 securities with fair value of 97.9% of amortized cost at December 31, 2017. During the three months ended September 30, 2018 and 2017, an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $0 and $100,000, respectively, and or the nine months ended September 30, 2018 and 2017, an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $0 and $418,366, respectively.

On a quarterly basis, the Company evaluates its fixed maturity securities held to maturity. This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”). Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for impairment. Securities with ratings of 3 to 5 are evaluated for impairment. Securities with a rating of 6 are automatically determined to be impaired and are written down. The evaluation involves an analysis of the securities in relation to historical values, interest payment history, projected earnings and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating. Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely make interest and principal payments in accordance with the terms of the financial instrument. If it is unlikely that the security will meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated market value and an impairment loss is recognized. Impairment losses are treated as credit losses as the Company holds fixed maturity securities to maturity unless the underlying conditions have changed in the financial instrument to require an impairment.

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 amortized cost and estimated fair value of fixed maturity securities held to maturity, at September 30, 2018, 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 1 year	$ 2,899,715	$ 2,964,076
Due in 2-5 years	66,428,822	66,259,870
Due in 5-10 years	69,688,359	69,760,698
Due in more than 10 years	77,026,677	81,048,260
Mortgage-backed securities	13,731,279	13,542,789
Redeemable preferred stock	612,023	648,460
Total held to maturity	$ 230,386,875	$ 234,224,153

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”). The Company currently has deposited a total of $50,000,000, par value, of United States Treasury fixed maturity securities with FHLB. These securities generate interest income for the Company and are available to use as collateral on any cash borrowings from the FHLB. As of September 30, 2018, the Company owed $40,000,000 to the FHLB. This amount owed was paid in October 2018.

Equity Securities

The following tables summarize unrealized losses on equity securities that were carried at estimated fair value based on quoted trading prices at December 31, 2017. The unrealized losses were primarily the result of decreases in fair value in the retail, industrial and energy sectors. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related equity securities 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 December 31, 2017
Industrial, miscellaneous and all other	$ 213,097	98	$ 419,572	81	$ 632,669
Total unrealized losses	$ 213,097	98	$ 419,572	81	$ 632,669
Fair Value	$ 847,718		$ 1,329,213		$ 2,176,931

The average fair value of the equity securities was 77.5% of the original investment as of December 31, 2017. 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.

The fair values for equity securities are based on quoted market prices.

See Note 2 regarding the adoption of ASU 2016-01 on January 1, 2018. The Company now recognizes the changes (unrealized gains and losses) in the fair value of these equity securities through earnings as part of gains on investments and other assets on the condensed consolidated statements of earnings instead of other comprehensive income on the condensed consolidated balance sheets.

The Company’s net gains from investments and other assets, including net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments are summarized as follows:

	Three Months Ended September 30		Nine Months Ended September 30
	2018	2017	2018		2017
Fixed maturity securities held to maturity:
Gross realized gains	$ 109,554	$ 110,529	$ 397,190		$ 163,950
Gross realized losses	(31,670)	(651,754)	(601,303)		(686,819)
Other than temporary impairments	-	(100,000)	-		(418,366)

Equity securities:
Gross realized gains	-	25,898	-		132,350
Gross realized losses	-	(26)	-		(58,464)
Other than temporary impairments	-	(63,375)	-		(63,375)
Gains and (losses) during 2018 on securities sold in 2018	11,214	-	(13,933)		-
Unrealized gains and (losses) on securities held at the end of the period	284,192	-	71,143		-

Other assets:
Gross realized gains	814,471	225,022	26,060,598	(1)	2,006,721
Gross realized losses	(165,334)	(29,335)	(542,100)		(844,672)
Total	$ 1,022,427	$ (483,041)	$ 25,371,595		$ 231,325

(1) Includes a one-time gain of $22,252,000 from the sale of Dry Creek at East Village apartments.

The net realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined using the specific identification method.

The carrying amount of held to maturity securities sold was $4,998,249 and $2,240,249 for the nine months ended September 30, 2018 and 2017, respectively. The net realized loss related to these sales was $243,023 and $385,484 for the nine months ended September 30, 2018 and 2017, respectively. Although the intent is to buy and hold a fixed maturity security to maturity, the Company will sell a security prior to maturity if conditions have changed within the entity that issued the security to increase the risk of default to an unacceptable level.

Major categories of net investment income are as follows:

	Three Months Ended September 30		Nine Months Ended September 30
	2018	2017	2018	2017
Fixed maturity securities held to maturity	$ 2,481,202	$ 2,692,586	$ 7,521,884	$ 7,475,156
Equity securities	64,214	66,320	176,126	209,517
Mortgage loans held for investment	4,240,624	2,973,349	14,016,985	8,803,257
Real estate held for investment	2,124,138	2,818,672	6,423,996	8,540,756
Policy loans	85,044	195,098	296,540	621,854
Insurance assignments	3,583,964	3,234,520	10,956,651	9,943,561
Other investments	57,050	16,051	186,594	36,041
Cash and cash equivalents	375,310	109,939	752,339	311,989
Gross investment income	13,011,546	12,106,535	40,331,115	35,942,131
Investment expenses	(3,370,050)	(3,886,105)	(10,873,223)	(10,383,018)
Net investment income	$ 9,641,496	$ 8,220,430	$ 29,457,892	$ 25,559,113

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $81,486 and $129,235 for the three months ended September 30, 2018 and 2017, respectively, and $287,545 and $369,721 for the nine months ended September 30, 2018 and 2017, 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 with regulatory authorities as required by law amounted to $9,204,288 at September 30, 2018 and $9,264,977 at December 31, 2017. These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on equity securities) at September 30, 2018, other than investments issued or guaranteed by the United States Government.

Real Estate Held for Investment

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 and 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 the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

The aggregated net ending balance of commercial real estate that serves as collateral for bank borrowings was approximately $84,976,000 and $64,704,000 as of September 30, 2018 and December 31, 2017, respectively. The associated bank loan carrying values totaled approximately $52,139,000 and $40,994,000 as of September 30, 2018 and December 31, 2017, respectively.

The following is a summary of the Company’s commercial real estate held for investment for the periods presented:

	Net Ending Balance				Total Square Footage
	September 30		December 31		September 30	December 31
	2018		2017		2018	2017
Arizona	$ 4,000	(1)	$ 4,000	(1)	-	-
Arkansas	-		96,169		-	3,200
Kansas	6,086,759		7,200,000		222,679	222,679
Louisiana	474,069		493,197		7,063	7,063
Mississippi	3,655,283		3,725,039		33,821	33,821
New Mexico	7,000	(1)	7,000	(1)	-	-
Texas	335,000	(1)	335,000	(1)	-	23,470
Utah	81,526,319	(2)	61,108,384	(2)	502,129	433,244

	$ 92,088,430		$ 72,968,789		765,692	723,477


(1) Undeveloped land

(2) Includes Center53 completed in July 2017. The Company is currently in the process of leasing the building.

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 September 30, 2018, SNRE manages 90 residential properties in 8 states across the United States.

The net ending balance of residential real estate that serves as collateral for a bank borrowing was approximately $0 and $34,431,000, as of September 30, 2018 and December 31, 2017, respectively. The associated bank loan carrying value was approximately $0 and $26,773,000 as of September 30, 2018 and December 31, 2017, respectively. This real estate relates to the Company’s Dry Creek at East Village apartment complex sold in March 2018.

The net ending balance of foreclosed residential real estate included in residential real estate held for investment is $26,747,000 and $33,372,000 as of September 30, 2018 and December 31, 2017, respectively.

The following is a summary of the Company’s residential real estate held for investment for the periods presented:

	Net Ending Balance
	September	December 31
	2018	2017
Arizona	$ -	$ 217,105
California	4,064,197	5,463,878
Florida	6,677,953	7,000,684
Hawaii	-	712,286
Ohio	10,000	10,000
Oklahoma	-	17,500
Tennessee	105,260	-
Texas	552,615	509,011
Utah	14,951,798	54,113,272
Virginia	150,175	-
Washington	476,181	286,181
	$ 26,988,179	$ 68,329,917

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 70,000 square feet, or approximately 10% of the overall commercial real estate holdings.

As of September 30, 2018, 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	21,521	27%
121 West Election Road, Draper, UT	Mortgage Sales	78,978	19%


(1) This asset is included in property and equipment on the condensed consolidated balance sheets

Mortgage Loans Held for Investment

Mortgage loans held for investment consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, maturity dates range from nine 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 September 30, 2018, the Company had 51%, 11%, 13%, 5%, 4%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, Nevada, California, Arizona, and Tennessee, respectively.

Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs and the related allowance for loan losses. Interest income is included in net investment income on the condensed consolidated statements of earnings and is recognized when earned. The Company defers related material loan origination fees, net of related direct loan origination costs, and amortizes the net fees over the term of the loans. Origination fees are included in net investment income on the condensed consolidated statements of earnings.

Mortgage loans are secured by the underlying property and require an appraisal at the time of underwriting and funding. Generally, the Company will fund a loan not to exceed 80% of the loan’s collateral fair market value. Amounts over 80% will require additional collateral or mortgage insurance by an approved third-party insurer.

The Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account). The allowance is comprised of two components. The first component is an allowance for collectively evaluated impairment that is based upon the Company’s historical experience in collecting similar receivables. The second component is based upon individual evaluation of loans that are determined to be impaired. Upon determining impairment, the Company establishes an individual impairment allowance based upon an assessment of the fair value of the underlying collateral. In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income. When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment. The Company will rent the properties until it is deemed desirable to sell them.

The allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the performance status of the loans, or the Company’s actual collection experience. The actual losses could change, in the near term, from the established allowance, based upon the occurrence or non-occurrence of these events.

For purposes of determining the allowance for losses, the Company has segmented its mortgage loans held for investment by loan type. The Company’s loan types are commercial, residential, and residential construction. The inherent risks within the portfolio vary depending upon the loan type as follows:

Commercial - Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation as agreed. Commercial loans are made primarily based on the underlying collateral supporting the loan. Accordingly, the repayment of a commercial loan depends primarily on the collateral and its ability to generate income and secondary on the borrower’s (or guarantors) ability to repay.

Residential – Secured by family dwelling units. These loans are secured by first mortgages on the unit, which are generally the primary residence of the borrower, generally at a loan-to-value ratio (“LTV”) of 80% or less.

Residential construction (including land acquisition and development) – Underwritten in accordance with the Company’s underwriting policies which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent appraisal valuations. These loans will rely on the value associated with the project upon completion. These cost and valuation estimates may be inaccurate. Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing. Additionally, land is underwritten according to the Company’s policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These cost and valuation estimates may be inaccurate. These loans are considered to be of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.

Allowance for Credit Losses and Recorded Investment in Mortgage Loans

	Commercial	Residential	Residential Construction	Total
September 30, 2018
Allowance for credit losses:
Beginning balance - January 1, 2018	$ 187,129	$ 1,546,447	$ 35,220	$ 1,768,796
Charge-offs	-	(84,902)	-	(84,902)
Provision	-	(213,736)	-	(213,736)
Ending balance - September 30, 2018	$ 187,129	$ 1,247,809	$ 35,220	$ 1,470,158

Ending balance: individually evaluated for impairment	$ -	$ 75,064	$ -	$ 75,064

Ending balance: collectively evaluated for impairment	$ 187,129	$ 1,172,745	$ 35,220	$ 1,395,094

Mortgage loans:
Ending balance	$ 32,869,447	$ 79,930,807	$ 71,330,891	$ 184,131,145

Ending balance: individually evaluated for impairment	$ 195,911	$ 3,088,265	$ 1,078,529	$ 4,362,705

Ending balance: collectively evaluated for impairment	$ 32,673,536	$ 76,842,542	$ 70,252,362	$ 179,768,440

December 31, 2017
Allowance for credit losses:
Beginning balance - January 1, 2017	$ 187,129	$ 1,461,540	$ 100,114	$ 1,748,783
Charge-offs	-	(351,357)	(64,894)	(416,251)
Provision	-	436,264	-	436,264
Ending balance - December 31, 2017	$ 187,129	$ 1,546,447	$ 35,220	$ 1,768,796

Ending balance: individually evaluated for impairment	$ -	$ 237,560	$ -	$ 237,560

Ending balance: collectively evaluated for impairment	$ 187,129	$ 1,308,887	$ 35,220	$ 1,531,236

Mortgage loans:
Ending balance	$ 54,954,865	$ 102,527,111	$ 50,157,533	$ 207,639,509

Ending balance: individually evaluated for impairment	$ -	$ 4,923,552	$ 461,834	$ 5,385,386

Ending balance: collectively evaluated for impairment	$ 54,954,865	$ 97,603,559	$ 49,695,699	$ 202,254,123

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

Age Analysis of Mortgage Loans Held for Investment

	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
September 30, 2018
Commercial	$ 3,745,013	$ -	$ 195,911	$ -	$ 3,940,924	$ 28,928,523	$ 32,869,447	$ (187,129)	$ (20,919)	$ 32,661,399
Residential	10,783,020	1,769,338	2,019,323	1,068,942	15,640,623	64,290,184	79,930,807	(1,247,809)	(678,985)	78,004,013
Residential Construction	-	-	1,078,529	-	1,078,529	70,252,362	71,330,891	(35,220)	(579,561)	70,716,110

Total	$ 14,528,033	$ 1,769,338	$ 3,293,763	$ 1,068,942	$ 20,660,076	$ 163,471,069	$ 184,131,145	$ (1,470,158)	$ (1,279,465)	$ 181,381,522

December 31, 2017
Commercial	$ 1,943,495	$ -	$ -	$ -	$ 1,943,495	$ 53,011,370	$ 54,954,865	$ (187,129)	$ (67,411)	$ 54,700,325
Residential	6,613,479	495,347	3,591,333	1,332,219	12,032,378	90,494,733	102,527,111	(1,546,447)	(1,164,130)	99,816,534
Residential Construction	-	-	461,834	-	461,834	49,695,699	50,157,533	(35,220)	(428,287)	49,694,026

Total	$ 8,556,974	$ 495,347	$ 4,053,167	$ 1,332,219	$ 14,437,707	$ 193,201,802	$ 207,639,509	$ (1,768,796)	$ (1,659,828)	$ 204,210,885


(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

Impaired Mortgage Loans Held for Investment

Impaired mortgage loans held for investment 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
September 30, 2018
With no related allowance recorded:
Commercial	$ 195,911	$ 195,911	$ -	$ 65,304	$ -
Residential	1,592,174	1,592,174	-	2,693,459	-
Residential construction	1,078,529	1,078,529	-	733,603	-

With an allowance recorded:
Commercial	$ -	$ -	$ -	$ -	$ -
Residential	1,496,091	1,496,091	75,064	1,615,392	-
Residential construction	-	-	-	-	-

Total:
Commercial	$ 195,911	$ 195,911	$ -	$ 65,304	$ -
Residential	3,088,265	3,088,265	75,064	4,308,851	-
Residential construction	1,078,529	1,078,529	-	733,603	-

December 31, 2017
With no related allowance recorded:
Commercial	$ -	$ -	$ -	$ 365,220	$ -
Residential	3,322,552	3,322,552	-	3,290,094	-
Residential construction	461,834	461,834	-	277,232	-

With an allowance recorded:
Commercial	$ -	$ -	$ -	$ -	$ -
Residential	1,601,000	1,601,000	237,560	1,350,115	-
Residential construction	-	-	-	-	-

Total:
Commercial	$ -	$ -	$ -	$ 365,220	$ -
Residential	4,923,552	4,923,552	237,560	4,640,209	-
Residential construction	461,834	461,834	-	277,232	-

Credit Risk Profile Based on Performance Status

The Company’s mortgage loan held for investment 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 held for investment were as follows:

Mortgage Loans Held for Investment Credit Exposure
Credit Risk Profile Based on Payment Activity

	Commercial		Residential		Residential Construction		Total
	September 30, 2018	December 31, 2017	September 30, 2018	December 31, 2017	September 30, 2018	December 31, 2017	September 30, 2018	December 31, 2017

Performing	$ 32,673,536	$ 54,954,865	$ 76,842,542	$ 97,603,559	$ 70,252,362	$ 49,695,699	$ 179,768,440	$ 202,254,123
Non-performing	195,911	-	3,088,265	4,923,552	1,078,529	461,834	4,362,705	5,385,386

Total	$ 32,869,447	$ 54,954,865	$ 79,930,807	$ 102,527,111	$ 71,330,891	$ 50,157,533	$ 184,131,145	$ 207,639,509

Non-Accrual Mortgage Loans Held for Investment

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 interest income that had been accrued. Payments received for loans on a non-accrual status are recognized on a cash basis. Interest income recognized from any payments received for loans on a non-accrual status was immaterial. Accrual of interest resumes if a loan is brought current. Interest not accrued on these loans totals approximately $200,000 and $204,000 as of September 30, 2018 and December 31, 2017, respectively.

The following is a summary of mortgage loans held for investment on a non-accrual status for the periods presented.

	Mortgage Loans on Non-Accrual Status

	As of September 30 2018	As of December 31 2017
Commercial	$ 195,911	$ -
Residential	3,088,265	4,923,552
Residential construction	1,078,529	461,834
Total	$ 4,166,794	$ 5,385,386