XML 24 R11.htm IDEA: XBRL DOCUMENT
v3.20.2

3) Investments | 6 Months Ended
--- | ---
Jun. 30, 2020
Disclosure Text Block [Abstract] |
3) Investments | 3) Investments The Company’s investments as of June 30, 2020 are summarized as follows:
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
June 30, 2020: |  |  |  |  |  |  |  |
Fixed maturity securities, available for sale, at estimated fair value: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 102,442,154 |  | $ 2,147,334 |  | $ - |  | $ 104,589,488
Obligations of states and political subdivisions |  | 5,878,900 |  | 269,394 |  | (2,661) |  | 6,145,633
Corporate securities including public utilities |  | 182,731,042 |  | 21,371,660 |  | (2,841,768) |  | 201,260,934
Mortgage-backed securities |  | 35,789,063 |  | 1,209,447 |  | (734,173) |  | 36,264,337
Redeemable preferred stock |  | 364,339 |  | 21,561 |  | (17,500) |  | 368,400
Total fixed maturity securities available for sale |  | $ 327,205,498 |  | $ 25,019,396 |  | $ (3,596,102) |  | $ 348,628,792
Equity securities at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 12,380,259 |  | $ 1,525,151 |  | $ (2,113,899) |  | $ 11,791,511
Total equity securities at estimated fair value |  | $ 12,380,259 |  | $ 1,525,151 |  | $ (2,113,899) |  | $ 11,791,511
Mortgage loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 109,304,960 |  |  |  |  |  |
Residential construction |  | 106,890,366 |  |  |  |  |  |
Commercial |  | 49,613,367 |  |  |  |  |  |
Less: Unamortized deferred loan fees, net |  | (1,730,243) |  |  |  |  |  |
Less: Allowance for loan losses |  | (2,443,557) |  |  |  |  |  |
Less: Net discounts |  | (1,216,889) |  |  |  |  |  |
Total mortgage loans held for investment |  | $ 260,418,004 |  |  |  |  |  |
Real estate held for investment - net of accumulated depreciation: |  |  |  |  |  |  |  |
Residential |  | $ 19,973,537 |  |  |  |  |  |
Commercial |  | 93,218,885 |  |  |  |  |  |
Total real estate held for investment |  | $ 113,192,422 |  |  |  |  |  |
Real estate held for sale: |  |  |  |  |  |  |  |
Residential |  | $ 4,522,020 |  |  |  |  |  |
Commercial |  | 6,076,321 |  |  |  |  |  |
Total real estate held for sale |  | $ 10,598,341 |  |  |  |  |  |
Other investments and policy loans at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 14,450,587 |  |  |  |  |  |
Insurance assignments |  | 43,276,682 |  |  |  |  |  |
Federal Home Loan Bank stock (1) |  | 4,056,600 |  |  |  |  |  |
Other investments |  | 5,450,438 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (1,533,696) |  |  |  |  |  |
Total policy loans and other investments |  | $ 65,700,611 |  |  |  |  |  |
Accrued investment income |  | $ 5,008,772 |  |  |  |  |  |
Total investments |  | $ 815,338,453 |  |  |  |  |  |
(1) Includes $874,400 of Membership stock and $3,182,200 of Activity stock due to short-term borrowings.
The Company’s investments as of December 31, 2019 are summarized as follows:
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
December 31, 2019: |  |  |  |  |  |  |  |
Fixed maturity securities, available for sale, at estimated fair value: |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ 142,740,641 |  | $ 632,185 |  | $ (25,215) |  | $ 143,347,611
Obligations of states and political subdivisions |  | 7,450,366 |  | 87,812 |  | (9,026) |  | 7,529,152
Corporate securities including public utilities |  | 156,599,184 |  | 16,768,449 |  | (463,413) |  | 172,904,220
Mortgage-backed securities |  | 31,475,280 |  | 597,395 |  | (240,177) |  | 31,832,498
Redeemable preferred stock |  | 364,339 |  | - |  | - |  | 364,339
Total fixed maturity securities available for sale |  | $ 338,629,810 |  | $ 18,085,841 |  | $ (737,831) |  | $ 355,977,820
Equity securities at estimated fair value: |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ 6,900,537 |  | $ 1,139,799 |  | $ (769,171) |  | $ 7,271,165
Total equity securities at estimated fair value |  | $ 6,900,537 |  | $ 1,139,799 |  | $ (769,171) |  | $ 7,271,165
Mortgage loans held for investment at amortized cost: |  |  |  |  |  |  |  |
Residential |  | $ 113,043,965 |  |  |  |  |  |
Residential construction |  | 89,430,237 |  |  |  |  |  |
Commercial |  | 38,718,220 |  |  |  |  |  |
Less: Unamortized deferred loan fees, net |  | (2,391,567) |  |  |  |  |  |
Less: Allowance for loan losses |  | (1,453,037) |  |  |  |  |  |
Less: Net discounts |  | (653,272) |  |  |  |  |  |
Total mortgage loans held for investment |  | $ 236,694,546 |  |  |  |  |  |
Real estate held for investment - net of accumulated depreciation: |  |  |  |  |  |  |  |
Residential |  | $ 12,530,306 |  |  |  |  |  |
Commercial |  | 90,226,640 |  |  |  |  |  |
Total real estate held for investment |  | $ 102,756,946 |  |  |  |  |  |
Real estate held for sale: |  |  |  |  |  |  |  |
Residential |  | $ 8,021,306 |  |  |  |  |  |
Commercial |  | 6,076,321 |  |  |  |  |  |
Total real estate held for sale |  | $ 14,097,627 |  |  |  |  |  |
Other investments and policy loans at amortized cost: |  |  |  |  |  |  |  |
Policy loans |  | $ 14,762,805 |  |  |  |  |  |
Insurance assignments |  | 41,062,965 |  |  |  |  |  |
Federal Home Loan Bank stock (1) |  | 894,300 |  |  |  |  |  |
Other investments |  | 4,973,225 |  |  |  |  |  |
Less: Allowance for doubtful accounts |  | (1,448,026) |  |  |  |  |  |
Total policy loans and other investments |  | $ 60,245,269 |  |  |  |  |  |
Accrued investment income |  | $ 4,833,232 |  |  |  |  |  |
Total investments |  | $ 781,876,605 |  |  |  |  |  |
(1) Includes $894,300 of Membership stock and $-0- of Activity stock due to short-term borrowings.
Fixed Maturity Securities The following tables summarize unrealized losses on fixed maturity securities available for sale, which were carried at estimated fair value, at June 30, 2020 and December 31, 2019. The unrealized losses were primarily related to interest rate fluctuations and uncertainties relating to COVID-19. 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, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Obligations of States and Political Subdivisions |  | $ 2,661 |  | $ 717,466 |  | $ - |  | $ - |  | $ 2,661 |  | $ 717,466
Corporate Securities |  | 1,876,784 |  | 22,141,540 |  | 964,984 |  | 3,039,240 |  | 2,841,768 |  | 25,180,780
Mortgage and other asset-backed securities |  | 710,364 |  | 10,024,319 |  | 23,809 |  | 504,583 |  | 734,173 |  | 10,528,902
Redeemable preferred stock |  | 17,500 |  | 232,500 |  | - |  | - |  | 17,500 |  | 232,500
Total unrealized losses |  | $ 2,607,309 |  | $ 33,115,825 |  | $ 988,793 |  | $ 3,543,823 |  | $ 3,596,102 |  | $ 36,659,648
At December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Securities and Obligations |  |  |  |  |  |  |  |  |  |  |  |
of U.S. Government Agencies |  | $ 20,211 |  | $ 30,629,288 |  | $ 5,004 |  | $ 10,000,400 |  | $ 25,215 |  | $ 40,629,688
Obligations of States and Political Subdivisions |  | 9,026 |  | 3,062,889 |  | - |  | - |  | 9,026 |  | 3,062,889
Corporate Securities |  | 118,746 |  | 7,184,311 |  | 344,667 |  | 3,950,509 |  | 463,413 |  | 11,134,820
Mortgage and other asset-backed securities |  | 205,470 |  | 13,266,443 |  | 34,707 |  | 502,769 |  | 240,177 |  | 13,769,212
Total unrealized losses |  | $ 353,453 |  | $ 54,142,931 |  | $ 384,378 |  | $ 14,453,678 |  | $ 737,831 |  | $ 68,596,609
There were 134 securities with fair value of 91.1% of amortized cost at June 30, 2020. There were 93 securities with fair value of 98.9% of amortized cost at December 31, 2019. No credit losses have been recognized for the three and six months ended June 30, 2020 and 2019. On a quarterly basis, the Company evaluates its fixed maturity securities available for sale. 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 available for sale, at June 30, 2020, 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
Due in 1 year |  | $ 61,039,649 |  | $ 61,451,128
Due in 2-5 years |  | 73,278,818 |  | 76,149,038
Due in 5-10 years |  | 82,777,913 |  | 88,468,598
Due in more than 10 years |  | 73,955,716 |  | 85,927,291
Mortgage-backed securities |  | 35,789,063 |  | 36,264,337
Redeemable preferred stock |  | 364,339 |  | 368,400
Total |  | $ 327,205,498 |  | $ 348,628,792
The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company pledged a total of $100,000,000, par value, of United States Treasury fixed maturity securities with the FHLB at June 30, 2020. These securities are used as collateral on any cash borrowings from the FHLB. As of June 30, 2020, the Company owed $79,000,000 to the FHLB and its estimated remaining maximum borrowing capacity was $19,572,000. Investment Related Earnings The Company’s 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 June 30 |  | Six Months Ended June 30
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Fixed maturity securities: |  |  |  |  |  |  |  |
Gross realized gains |  | $ 55,138 |  | $ 163,038 |  | $ 150,959 |  | $ 248,626
Gross realized losses |  | (12,089) |  | (69,622) |  | (12,089) |  | (105,015)
Equity securities: |  |  |  |  |  |  |  |
Gains (losses) on securities sold |  | (50,029) |  | 41,088 |  | (107,471) |  | 52,664
Unrealized gains and (losses) on securities held at the end of the period |  | 1,738,059 |  | 14,016 |  | (1,023,797) |  | 775,224
Other assets: |  |  |  |  |  |  |  |
Gross realized gains |  | 48,736 |  | 688,289 |  | 505,764 |  | 1,793,223
Gross realized losses |  | 458,464 |  | (1,862,702) |  | (487,334) |  | (1,983,954)
Total |  | $ 2,238,279 |  | $ (1,025,893) |  | $ (973,968) |  | $ 780,768
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. On December 31, 2019, the Company changed the classification of its bond and preferred stock investments from held to maturity to available for sale based on the Company’s need to be able to respond proactively to market risks in managing its portfolio. Proceeds received from the sale of fixed maturity available for sale securities for the six months ended June 30, 2020, were $2,753,331, and resulted in gross realized gains and gross realized losses of $133,339 and $137, respectively. The carrying amount of held to maturity securities sold for the six months ended June 30, 2019 was $662,972 and the net realized loss related to these sales was $53,097. Major categories of net investment income are as follows:
| Three Months Ended June 30 |  | Six Months Ended June 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Fixed maturity securities | $ 3,143,072 |  | $ 2,528,689 |  | $ 6,067,786 |  | $ 5,032,554
Equity securities | 111,122 |  | 74,730 |  | 203,164 |  | 152,651
Mortgage loans held for investment | 5,582,152 |  | 4,525,817 |  | 11,236,042 |  | 8,629,184
Real estate held for investment | 2,787,881 |  | 2,096,927 |  | 5,941,267 |  | 4,007,221
Policy loans | 257,527 |  | 106,905 |  | 491,492 |  | 195,042
Insurance assignments | 4,383,398 |  | 3,906,832 |  | 8,682,602 |  | 8,118,952
Other investments | 398 |  | 52,130 |  | 25,421 |  | 106,678
Cash and cash equivalents | 22,385 |  | 465,959 |  | 320,390 |  | 964,876
Gross investment income | 16,287,935 |  | 13,757,989 |  | 32,968,164 |  | 27,207,158
Investment expenses | (3,325,190) |  | (3,217,154) |  | (6,604,920) |  | (6,624,655)
Net investment income | $ 12,962,745 |  | $ 10,540,835 |  | $ 26,363,244 |  | $ 20,582,503
Net investment income includes income earned by the restricted assets cemeteries and mortuaries of $140,093 and $134,229 for the three months ended June 30, 2020 and 2019, respectively, and $250,732 and $220,516 for the six months ended June 30, 2020 and 2019, 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 $9,632,398 at June 30, 2020 and $9,633,818 at December 31, 2019. 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 and fixed maturity securities) at June 30, 2020, other than investments issued or guaranteed by the United States Government. Real Estate Held for Investment and Held for Sale 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 and Held for Sale 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 13 commercial properties in 5 states. These properties include office buildings, an assisted living facility, a funeral home, flex office space, and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company also holds undeveloped land that may be used for future commercial developments. 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 $70,578,000 and $87,815,000 as of June 30, 2020 and December 31, 2019, respectively. The associated bank loan carrying values totaled approximately $47,068,000 and $54,917,000 as of June 30, 2020 and December 31, 2019, respectively. During the three months ended June 30, 2020 and 2019, the Company recorded impairment losses on commercial real estate held for sale of $15,551 and $-0-, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded impairment losses on commercial real estate held for sale of $46,980 and $1,867,197, respectively. These impairment losses relate to an office building held by the life insurance segment. Impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings. 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
|  | June 30 2020 |  | December 31 2019 |  | June 30 2020 |  | December 31 2019
Louisiana |  | $ 5,929,267 |  | $ 6,009,079 |  | 125,114 |  | 125,114
Mississippi |  | 2,914,989 |  | 2,951,478 |  | 21,521 |  | 21,521
Utah (1) |  | 84,374,629 |  | 81,266,083 |  | 462,730 |  | 462,730
|  | $93,218,885 |  | $ 90,226,640 |  | 609,365 |  | 609,365
(1) Includes Center53 phase 1 completed in July 2017 and phase 2 which is under construction
The following is a summary of the Company’s commercial real estate held for sale for the periods presented:
|  | Net Ending Balance |  | Total Square Footage
|  | June 30 2020 |  | December 31 2019 |  | June 30 2020 |  | December 31 2019
Arizona (1) |  | $ 2,500 |  | $ 2,500 |  | - |  | -
Kansas |  | 4,800,000 |  | 4,800,000 |  | 222,679 |  | 222,679
Mississippi |  | 318,322 |  | 318,322 |  | 12,300 |  | 12,300
Nevada |  | 655,499 |  | 655,499 |  | 4,800 |  | 4,800
Texas (2) |  | 300,000 |  | 300,000 |  | - |  | -
|  | $ 6,076,321 |  | $ 6,076,321 |  | 239,779 |  | 239,779
(1) Undeveloped land |  |  |  |  |  |
(2) Improved commercial pad |  |  |  |  |  |
These properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months. Residential Real Estate Held for Investment and Held for Sale 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 also invests in residential subdivision developments. 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, 2020, SNRE manages 24 residential properties in 6 states across the United States. The net ending balance of foreclosed residential real estate included in residential real estate held for investment and sale is $7,698,000 and $12,434,000 as of June 30, 2020 and December 31, 2019, respectively. During the three and six months ended June 30, 2020 and 2019 the Company did not record any impairment losses on residential real estate held for investment or held for sale. Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings. The following is a summary of the Company’s residential real estate held for investment for the periods presented:
|  | Net Ending Balance
|  | June 30 2020 |  | December 31 2019
Florida |  | $ 1,269,577 |  | $ 2,487,723
Nevada |  | 686,124 |  | 293,516
Utah (1) |  | 17,731,655 |  | 9,462,886
Washington |  | 286,181 |  | 286,181
|  | $ 19,973,537 |  | $ 12,530,306
(1) Includes subdivision land developments
The following is a summary of the Company’s residential real estate held for sale for the periods presented:
|  | Net Ending Balance
|  | June 30 2020 |  | December 31 2019
California |  | 421,452 |  | 640,452
Florida |  | 1,351,040 |  | 1,300,641
Nevada |  | 293,516 |  | -
Ohio |  | 10,000 |  | 10,000
Utah |  | 2,446,012 |  | 5,880,213
Washington |  | - |  | 190,000
|  | $ 4,522,020 |  | $ 8,021,306
These properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months. 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. As of June 30, 2020, real estate owned and occupied by the Company is summarized as follows:
Location |  | Business Segment |  | Approximate Square Footage |  | Square Footage Occupied by the Company
121 W. Election Rd., Draper, UT |  | Corporate Offices, Life Insurance and Cemetery/Mortuary Operations |  | 78,979 |  | 18%
5201 Green Street, Salt Lake City, UT (1) |  | Life Insurance and Mortgage Operations |  | 39,157 |  | 73%
1044 River Oaks Dr., Flowood, MS |  | Life Insurance Operations |  | 19,694 |  | 28%
1818 Marshall Street, Shreveport, LA (1)(2) |  | Life Insurance Operations |  | 12,274 |  | 100%
909 Foisy Street, Alexandria, LA (1)(2) |  | Life Insurance Sales |  | 8,059 |  | 100%
812 Sheppard Street, Minden, LA (1)(2) |  | Life Insurance Sales |  | 1,560 |  | 100%
1550 N 3rd Street, Jena, LA (1)(2) |  | Life Insurance Sales |  | 1,737 |  | 100%
(1) Included in property and equipment on the condensed consolidated balance sheets |  |  |  |
(2) See Note 15 regarding the acquisition of Kilpatrick Life Insurance Company |  |  |  |
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 June 30, 2020, the Company had 54%, 15%, 8%, 5%, 5% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, Nevada, California, and Arizona, respectively. At December 31, 2019, the Company had 48%, 16%, 10%, 6%, 6% and 5% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada and Arizona, respectively. Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs, premiums, discounts 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 or held for sale. 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. The Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio. The following is a summary of the allowance for loan losses as a contra-asset account for the periods presented:
| Commercial |  | Residential |  | Residential Construction |  | Total
June 30, 2020 |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |
Beginning balance - January 1, 2020 | $ 187,129 |  | $ 1,222,706 |  | $ 43,202 |  | $ 1,453,037
Charge-offs | - |  | - |  | - |  | -
Provision | - |  | 990,520 |  | - |  | 990,520
Ending balance - June 30, 2020 | $ 187,129 |  | $ 2,213,226 |  | $ 43,202 |  | $ 2,443,557
Ending balance: individually evaluated for impairment | $ - |  | $ 427,069 |  | $ - |  | $ 427,069
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,786,157 |  | $ 43,202 |  | $ 2,016,488
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 49,613,367 |  | $ 109,304,960 |  | $ 106,890,366 |  | $ 265,808,693
Ending balance: individually evaluated for impairment | $ 1,039,013 |  | $ 7,106,397 |  | $ 1,389,574 |  | $ 9,534,984
Ending balance: collectively evaluated for impairment | $ 48,574,354 |  | $ 102,198,563 |  | $ 105,500,792 |  | $ 256,273,709
December 31, 2019 |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |
Beginning balance - January 1, 2019 | $ 187,129 |  | $ 1,125,623 |  | $ 35,220 |  | $ 1,347,972
Charge-offs | - |  | (32,692) |  | - |  | (32,692)
Provision | - |  | 129,775 |  | 7,982 |  | 137,757
Ending balance - December 31, 2019 | $ 187,129 |  | $ 1,222,706 |  | $ 43,202 |  | $ 1,453,037
Ending balance: individually evaluated for impairment | $ - |  | $ 195,993 |  | $ - |  | $ 195,993
Ending balance: collectively evaluated for impairment | $ 187,129 |  | $ 1,026,713 |  | $ 43,202 |  | $ 1,257,044
Mortgage loans: |  |  |  |  |  |  |
Ending balance | $ 38,718,220 |  | $ 113,043,965 |  | $ 89,430,237 |  | $ 241,192,422
Ending balance: individually evaluated for impairment | $ 4,488,719 |  | $ 3,752,207 |  | $ 655,000 |  | $ 8,895,926
Ending balance: collectively evaluated for impairment | $ 34,229,501 |  | $ 109,291,758 |  | $ 88,775,237 |  | $ 232,296,496
The following is a summary of the aging of mortgage loans held for investment for the periods presented:
| 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 | Unamortized discounts, net | Net Mortgage Loans
June 30, 2020 |  |  |  |  |  |  |  |  |  |
Commercial | $ 2,783,200 | $ 371,938 | $ 1,039,013 | $ - | $ 4,194,151 | $ 45,419,216 | $ 49,613,367 | $ (187,129) | $ (11,545) | $ (849,914) | $ 48,564,779
Residential | 7,624,435 | 3,308,995 | 5,423,083 | 1,683,314 | 18,039,827 | 91,265,133 | 109,304,960 | (2,213,226) | (1,258,346) | (366,975) | 105,466,413
Residential Construction | - | - | 1,389,574 | - | 1,389,574 | 105,500,792 | 106,890,366 | (43,202) | (460,352) | - | 106,386,812
Total | $ 10,407,635 | $ 3,680,933 | $ 7,851,670 | $ 1,683,314 | $23,623,552 | $242,185,141 | $ 65,808,693 | $(2,443,557) | $ (1,730,243) | $ (1,216,889) | $ 260,418,004
December 31, 2019 |  |  |  |  |  |  |  |  |  |
Commercial | $ 1,872,000 | $ - | $ 4,488,719 | $ - | $ 6,360,719 | $ 32,357,501 | $ 38,718,220 | $ (187,129) | $ (88,918) | $ (653,272) | $ 37,788,901
Residential | 10,609,296 | 4,085,767 | 2,100,742 | 1,651,465 | 18,447,270 | 94,596,695 | 113,043,965 | (1,222,706) | (1,567,581) | - | 110,253,678
Residential Construction | - | - | 655,000 | - | 655,000 | 88,775,237 | 89,430,237 | (43,202) | (735,068) | - | 88,651,967
Total | $ 12,481,296 | $ 4,085,767 | $ 7,244,461 | $ 1,651,465 | $25,462,989 | $215,729,433 | $241,192,422 | $(1,453,037) | $ (2,391,567) | $ (653,272) | $236,694,546
(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:
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance |  | Average Recorded Investment |  | Interest Income Recognized
June 30, 2020 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ 1,039,013 |  | $ 1,039,013 |  | $ - |  | $ 951,866 |  | $ -
Residential | 4,683,807 |  | 4,683,807 |  | - |  | 3,466,388 |  | -
Residential construction | 1,389,574 |  | 1,389,574 |  | - |  | 694,787 |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 2,422,590 |  | 2,422,590 |  | 427,069 |  | 2,355,231 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $ 1,039,013 |  | $ 1,039,013 |  | $ - |  | $ 951,866 |  | $ -
Residential | 7,106,397 |  | 7,106,397 |  | 427,069 |  | 5,821,619 |  | -
Residential construction | 1,389,574 |  | 1,389,574 |  | - |  | 694,787 |  | -
December 31, 2019 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ 4,488,719 |  | $ 4,488,719 |  | $ - |  | $ 1,499,043 |  | $ -
Residential | 2,254,189 |  | 2,254,189 |  | - |  | 3,367,151 |  | -
Residential construction | 655,000 |  | 655,000 |  | - |  | 1,457,278 |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial | $ - |  | $ - |  | $ - |  | $ - |  | $ -
Residential | 1,498,018 |  | 1,498,018 |  | 195,993 |  | 665,270 |  | -
Residential construction | - |  | - |  | - |  | - |  | -
Total: |  |  |  |  |  |  |  |  |
Commercial | $ 4,488,719 |  | $ 4,488,719 |  | $ - |  | $ 1,499,043 |  | $ -
Residential | 3,752,207 |  | 3,752,207 |  | 195,993 |  | 4,032,421 |  | -
Residential construction | 655,000 |  | 655,000 |  | - |  | 1,457,278 |  | -
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:
| Commercial |  | Residential |  | Residential Construction |  | Total
| June 30, 2020 |  | December 31, 2019 |  | June 30, 2020 |  | December 31, 2019 |  | June 30, 2020 |  | December 31, 2019 |  | June 30, 2020 |  | December 31, 2019
Performing | $ 48,574,354 |  | $ 34,229,501 |  | $ 102,198,563 |  | $109,291,758 |  | $ 105,500,792 |  | $ 88,775,237 |  | $ 256,273,709 |  | $ 232,296,496
Non-performing | 1,039,013 |  | 4,488,719 |  | 7,106,397 |  | 3,752,207 |  | 1,389,574 |  | 655,000 |  | 9,534,984 |  | 8,895,926
Total | $ 49,613,367 |  | $ 38,718,220 |  | $ 109,304,960 |  | $113,043,965 |  | $ 106,890,366 |  | $ 89,430,237 |  | $ 265,808,693 |  | $ 241,192,422
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 $384,000 and $203,000 as of June 30, 2020 and December 31, 2019, respectively. The following is a summary of mortgage loans held for investment on a non-accrual status for the periods presented.
| As of June 30 2020 |  | As of December 31 2019
Commercial | $ 1,039,013 |  | $ 4,488,719
Residential | 7,106,397 |  | 3,752,207
Residential construction | 1,389,574 |  | 655,000
Total | $ 9,534,984 |  | $ 8,895,926

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration