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Investments
 3 Months Ended
Mar. 31, 2022
Investments, Debt and Equity Securities [Abstract]  
Investments

3) Investments

 

The Company’s investments as of March 31, 2022 are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
March 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
U.S. Treasury securities and obligations of U.S. Government agencies  $51,218,752   $210,351   $(740,495)  $50,688,608 
                     
Obligations of states and political subdivisions   4,638,702    96,125    (45,061)   4,689,766 
                     
Corporate securities including public utilities   175,511,122    10,036,162    (1,505,578)   184,041,706 
                     
Mortgage-backed securities   33,066,449    274,636    (829,922)   32,511,163 
                     
Redeemable preferred stock   269,214    13,095    -    282,309 
                     
Total fixed maturity securities available for sale  $264,704,239   $10,630,369   $(3,121,056)  $272,213,552 
                     
Equity securities at estimated fair value:                    
                     
Common stock:                    
                     
Industrial, miscellaneous and all other  $8,662,438   $3,165,378   $(316,675)  $11,511,141 
                     
Total equity securities at estimated fair value  $8,662,438   $3,165,378   $(316,675)  $11,511,141 
                     
Mortgage loans held for investment at amortized cost:                    
Residential  $46,552,738                
Residential construction   193,151,868                
Commercial   43,251,622                
Less: Unamortized deferred loan fees, net   (1,075,371)               
Less: Allowance for loan losses   (1,603,676)               
Less: Net discounts   (365,342)               
                     
Total mortgage loans held for investment  $279,911,839                
                     
Real estate held for investment - net of accumulated depreciation:                    
Residential  $42,580,341                
Commercial   158,798,737                
                     
Total real estate held for investment  $201,379,078                
                     
Real estate held for sale:                    
Residential  $402,744                
Commercial   2,540,698                
                     
Total real estate held for sale  $2,943,442                
                     
Other investments and policy loans at amortized cost:                    
Policy loans  $13,261,353                
Insurance assignments   54,755,913                
Federal Home Loan Bank stock (1)   2,588,400                
Other investments   4,768,894                
Less: Allowance for doubtful accounts   (1,805,311)               
                     
Total policy loans and other investments  $73,569,249                
                     
Accrued investment income  $5,632,626                
                     
Total investments  $847,160,927                

 

(1) Includes $937,100 of Membership stock and $1,651,300 of Activity stock due to short-term borrowings.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

The Company’s investments as of December 31, 2021 are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2021:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
U.S. Treasury securities and obligations of U.S. Government agencies  $22,307,736   $578,567   $-   $22,886,303 
                     
Obligations of states and political subdivisions   4,649,917    212,803    (1,989)   4,860,731 
                     
Corporate securities including public utilities   174,711,061    21,791,370    (353,668)   196,148,763 
                     
Mortgage-backed securities   34,365,382    905,159    (161,332)   35,109,209 
                     
Redeemable preferred stock   269,214    13,383    -    282,597 
                     
Total fixed maturity securities available for sale  $236,303,310   $23,501,282   $(516,989)  $259,287,603 
                     
Equity securities at estimated fair value:                    
                     
Common stock:                    
                     
Industrial, miscellaneous and all other  $8,275,772   $3,626,444   $(305,802)  $11,596,414 
                     
Total equity securities at estimated fair value  $8,275,772   $3,626,444   $(305,802)  $11,596,414 
                     
Mortgage loans held for investment at amortized cost:                    
Residential  $53,533,712                
Residential construction   175,117,783                
Commercial   51,683,022                
Less: Unamortized deferred loan fees, net   (918,586)               
Less: Allowance for loan losses   (1,699,902)               
Less: Net discounts   (409,983)               
                     
Total mortgage loans held for investment  $277,306,046                
                     
Real estate held for investment - net of accumulated depreciation:                    
Residential  $41,972,462                
Commercial   155,393,335                
                     
Total real estate held for investment  $197,365,797                
                     
Real estate held for sale:                    
Residential  $1,190,602                
Commercial   2,540,698                
                     
Total real estate held for sale  $3,731,300                
                     
Other investments and policy loans at amortized cost:                    
Policy loans  $13,478,214                
Insurance assignments   48,632,808                
Federal Home Loan Bank stock (1)   2,547,100                
Other investments   4,983,251                
Less: Allowance for doubtful accounts   (1,686,218)               
                     
Total policy loans and other investments  $67,955,155                
                     
Accrued investment income  $6,313,012                
                     
Total investments  $823,555,327                

 

(1) Includes $905,700 of Membership stock and $1,641,400 of Activity stock due to short-term advances and letters of credit.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

Fixed Maturity Securities

 

The following table summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value at March 31, 2022 and at December 31, 2021. 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   Combined Unrealized Loss   Combined Fair Value 
At March 31, 2022                              
U.S. Treasury Securities And Obligations of U.S. Government Agencies  $740,495   $29,372,895   $-   $-   $740,495   $29,372,895 
Obligations of States and Political Subdivisions   45,061    1,377,655    -    -    45,061    1,377,655 
Corporate Securities   1,026,974    28,212,781    478,604    3,896,622    1,505,578    32,109,403 
Mortgage and other asset-backed securities   655,663    22,390,497    174,259    1,670,730    829,922    24,061,227 
Totals  $2,468,193   $81,353,828   $652,863   $5,567,352   $3,121,056   $86,921,180 
                               
At December 31, 2021                              
Obligations of States and Political Subdivisions  $1,989   $548,715   $-   $-   $1,989   $548,715 
Corporate Securities   73,507    4,638,750    280,161    3,771,813    353,668    8,410,563 
Mortgage and other asset-backed securities   72,952    7,934,760    88,380    1,582,804    161,332    9,517,564 
Totals  $148,448   $13,122,225   $368,541   $5,354,617   $516,989   $18,476,842 

 

There were 180 securities with fair value of 96.5% of amortized cost at March 31, 2022. There were 55 securities with fair value of 97.3% of amortized cost at December 31, 2021. No additional credit losses have been recognized for the three months ended March 31, 2022 and 2021, since the increase in unrealized losses is primarily a result of the recent rise in interest rates.

 

On a quarterly basis, the Company evaluates its fixed maturity securities classified as 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, unless current market or recent company news could lead to a credit downgrade. 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.

 

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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

The following table presents a rollforward of the Company’s cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale.

 

     2022     2021 
Balance of credit-related OTTI at January 1  $264,977   $370,975 
           
Additions for credit impairments recognized on:          
Securities not previously impaired   -    - 
Securities previously impaired   -    - 
           
Reductions for credit impairments previously recognized on:          
Securities that matured or were sold during the period (realized)   -    - 
Securities due to an increase in expected cash flows   -    - 
           
Balance of credit-related OTTI at March 31  $264,977   $370,975 

 

The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2022, by contractual maturity. 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  $13,431,790   $13,486,895 
Due in 2-5 years   97,740,824    98,279,298 
Due in 5-10 years   53,462,561    55,425,119 
Due in more than 10 years   66,833,402    72,328,770 
Mortgage-backed securities   33,066,449    32,511,163 
Redeemable preferred stock   269,214    282,309 
Total  $264,704,239   $272,213,552 

 

The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company pledged a total of $56,741,531, at estimated fair value, of fixed maturity securities with the FHLB at March 31, 2022. These securities are used as collateral on any cash borrowings from the FHLB. As of March 31, 2022, the Company owed $-0- to the FHLB and its estimated maximum borrowing capacity was $52,059,046.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

Investment Related Earnings

 

The following table presents the net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments from investments and other assets.

 

   2022   2021 
   Three Months Ended March 31 
   2022   2021 
Fixed maturity securities:          
Gross realized gains  $46,123   $97,622 
Gross realized losses   (930)   (24,997)
           
Equity securities:          
Gains (losses) on securities sold   (10,279)   106,569 
Unrealized gains and (losses) on securities held at the end of the period   (607,047)   952,030 
           
Other assets:          
Gross realized gains   838,508    1,109,358 
Gross realized losses   (94,400)   (280,469)
Total  $171,975   $1,960,113 

 

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.

 

Information regarding sales of fixed maturity securities available for sale is presented as follows.

 

     2022     2021 
   Three Months Ended March 31 
   2022   2021 
Proceeds from sales  $455,651   $819,565 
Gross realized gains   2,354    59,794 
Gross realized losses   (20)   - 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

Major categories of net investment income were as follows:

 

   2022   2021 
   Three Months Ended March 31 
   2022   2021 
Fixed maturity securities available for sale  $2,636,216   $2,824,111 
Equity securities   123,037    128,229 
Mortgage loans held for investment   7,960,178    6,084,417 
Real estate held for investment and sale   3,040,033    3,042,829 
Policy loans   306,282    232,353 
Insurance assignments   5,396,987    5,345,729 
Other investments   70,645    13,707 
Cash and cash equivalents   75,301    39,594 
Gross investment income   19,608,679    17,710,969 
Investment expenses   (4,414,373)   (3,417,082)
Net investment income  $15,194,306   $14,293,887 

 

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $476,708 and $161,211 for the three months ended March 31, 2022 and 2021, 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 $10,169,064 at March 31, 2022 and $10,168,853 at December 31, 2021 (December 31, 2021 amount corrected from that previously reported due to a typographical error). 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 March 31, 2022, other than investments issued or guaranteed by the United States Government.

 

Real Estate Held for Investment and Held for Sale

 

The Company strategically deploys 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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

The Company currently owns and operates 11 commercial properties in 5 states. These properties include office buildings, flex office space, and includes 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 loans was $137,775,232 and $134,251,205 as of March 31, 2022 and December 31, 2021, respectively. The associated bank loan carrying values totaled $92,644,180 and $85,663,148 as of March 31, 2022 and December 31, 2021, respectively.

 

During the three months ended March 31, 2022 and 2021, the Company did not record any impairment losses on commercial 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 Company’s commercial real estate held for investment is summarized as follows:

 

   Net Ending Balance   Total Square Footage 
   March 31
2022		   December 31 2021   March 31
2022		   December 31 2021 
Utah (1)   153,457,809    150,105,948    625,920    675,920 
Louisiana   2,415,170    2,426,612    31,778    31,778 
Mississippi   2,925,758    2,860,775    19,694    19,694 
                     
   $158,798,737   $155,393,335    677,392    727,392 

 

 

(1) Includes Center53 phase 1 and phase 2

 

The Company’s commercial real estate held for sale is summarized as follows:

 

   Net Ending Balance   Total Square Footage 
   March 31
2022		   December 31 2021   March 31
2022		   December 31 2021 
Kansas   2,000,000    2,000,000    222,679    222,679 
California   389,145    389,145    2,872    2,872 
Mississippi (1)   151,553    151,553    -    - 
                     
   $2,540,698   $2,540,698    225,551    225,551 

 

 

(1) Approximately 93 acres of undeveloped land

 

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 small portfolio of residential homes primarily as a result of loan foreclosures. The Company has the option to sell them or to continue to hold them for cash flow and acceptable returns. The Company also invests in residential subdivision land developments.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

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.

 

The net ending balance of foreclosed residential real estate included in residential real estate held for investment and sale is $210,963 and $1,190,602 as of March 31, 2022 and December 31, 2021, respectively.

 

During the three months ended March 31, 2022 and 2021 the Company recorded impairment losses on residential real estate held for sale of $94,400 and $-0-, respectively. Impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

 

The Company’s residential real estate held for investment is summarized as follows:

 

   Net Ending Balance 
   March 31
2022		   December 31 2021 
Utah (1)   42,580,341   $41,686,281 
Washington (2)   -    286,181 
   $42,580,341   $41,972,462 

 

 

(1) Includes subdivision land developments
(2) Improved residential lots

 

The following table presents additional information regarding the Company’s subdivision land developments in Utah.

 

   March 31
2022		   December 31 2021 
Lots developed   68    67 
Lots to be developed   548    548 
Ending Balance  $42,376,141   $41,479,434 

 

The Company’s residential real estate held for sale is summarized as follows:

 

     March 31
2022		     December 31 2021 
   Net Ending Balance 
   March 31
2022		   December 31 2021 
Nevada  $-   $979,640 
Texas   200,963    200,962 
Ohio   10,000    10,000 
Washington (1)   191,781    - 
Real estate held for sale  $402,744   $1,190,602 

 

(1) Improved residential lots

 

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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

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 March 31, 2022, real estate owned and occupied by the Company is summarized as follows:

 

Location  Business Segment  Approximate Square Footage   Square Footage Occupied by the Company 
433 West Ascension Way, Salt Lake City, UT - Center53 Building 2  Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales   221,000    50%
1044 River Oaks Dr., Flowood, MS  Life Insurance Operations   19,694    28%
1818 Marshall Street, Shreveport, LA (1)  Life Insurance Operations   12,274    100%
909 Foisy Street, Alexandria, LA (1)  Life Insurance Sales   8,059    100%
812 Sheppard Street, Minden, LA (1)  Life Insurance Sales   1,560    100%
1550 N 3rd Street, Jena, LA (1)  Life Insurance Sales   1,737    100%

 

 

(1) Included in property and equipment on the 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 March 31, 2022, the Company had 75%, 6%, 4%, 4%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, Nevada, California, and Arizona, respectively. At December 31, 2021, the Company had 70%, 7%, 5%, 4%, 4% and 2% of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, 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. As a practical expedient, 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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

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 and second mortgages on the unit. The borrower’s ability to repay is sensitive to the life events and general economic condition of the region. Where loan to values exceed 80%, the loan is generally guaranteed by private mortgage insurance, FHA or VA.

 

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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

The Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio. The following table presents the valuation allowance for loan losses as a contra-asset account.

 

   Commercial   Residential   Residential Construction   Total 
March 31, 2022                    
Allowance for credit losses:                    
Beginning balance - January 1, 2022  $187,129   $1,469,571   $43,202   $1,699,902 
Charge-offs   -    -    -    - 
Provision   -    (96,226)   -    (96,226)
Ending balance - March 31, 2022  $187,129   $1,373,345   $43,202   $1,603,676 
                     
Ending balance: individually evaluated for impairment  $-   $99,036   $-   $99,036 
                     
Ending balance: collectively evaluated for impairment  $187,129   $1,274,309   $43,202   $1,504,640 
                     
Mortgage loans:                    
Ending balance - March 31, 2022  $43,251,622   $46,552,738   $193,151,868   $282,956,228 
                     
Ending balance: individually evaluated for impairment  $1,736,752   $1,863,882   $-   $3,600,634 
                     
Ending balance: collectively evaluated for impairment  $41,514,870   $44,688,856   $193,151,868   $279,355,594 
                     
December 31, 2021                    
Allowance for credit losses:                    
Beginning balance - January 1, 2021  $187,129   $1,774,796   $43,202   $2,005,127 
Charge-offs   -    -    -    - 
Provision   -    (305,225)   -    (305,225)
Ending balance - December 31, 2021  $187,129   $1,469,571   $43,202   $1,699,902 
                     
Ending balance: individually evaluated for impairment  $-   $105,384   $-   $105,384 
                     
Ending balance: collectively evaluated for impairment  $187,129   $1,364,187   $43,202   $1,594,518 
                     
Mortgage loans:                    
Ending balance - December 31, 2021  $51,683,022   $53,533,712   $175,117,783   $280,334,517 
                     
Ending balance: individually evaluated for impairment  $1,723,372   $2,548,656   $-   $4,272,028 
                     
Ending balance: collectively evaluated for impairment  $49,959,650   $50,985,056   $175,117,783   $276,062,489(1)

 

 

(1) Amount corrected from that previously reported due to a typographical error.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

The following table presents the aging of mortgage loans held for investment.

 

   Commercial   Residential   Residential
 Construction		   Total 
March 31, 2022                    
30-59 Days Past Due  $-   $1,294,666   $-   $1,294,666 
60-89 Days Past Due   -    978,669    -    978,669 
Greater Than 90 Days (1)   1,233,200    1,153,957    -    2,387,157 
In Process of Foreclosure (1)   503,552    709,925    -    1,213,477 
Total Past Due   1,736,752    4,137,217    -    5,873,969 
Current   41,514,870    42,415,521    193,151,868    277,082,259 
Total Mortgage Loans   43,251,622    46,552,738    193,151,868    282,956,228 
Allowance for Loan Losses   (187,129)   (1,373,345)   (43,202)   (1,603,676)
Unamortized deferred loan fees, net   (84,626)   (467,977)   (522,768)   (1,075,371)
Unamortized discounts, net   (244,362)   (120,980)   -    (365,342)
Net Mortgage Loans  $42,735,505   $44,590,436   $192,585,898   $279,911,839 
                     
December 31, 2021                    
30-59 Days Past Due  $-   $3,117,826   $1,363,127   $4,480,953 
60-89 Days Past Due   100,204    580,815    -    681,019 
Greater Than 90 Days (1)   1,723,372    2,052,062    -    3,775,434 
In Process of Foreclosure (1)   -    496,594    -    496,594 
Total Past Due   1,823,576    6,247,297    1,363,127    9,434,000 
Current   49,859,446    47,286,415    173,754,656    270,900,517 
Total Mortgage Loans   51,683,022    53,533,712    175,117,783    280,334,517 
Allowance for Loan Losses   (187,129)   (1,469,571)   (43,202)   (1,699,902)
Unamortized deferred loan fees, net   (36,813)   (498,600)   (383,173)   (918,586)
Unamortized discounts, net   (240,614)   (169,369)   -    (409,983)
Net Mortgage Loans  $51,218,466   $51,396,172   $174,691,408   $277,306,046 

 

 

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

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

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 are summarized as follows:

 

   Recorded Investment   Unpaid Principal Balance   Related Allowance   Average Recorded Investment   Interest Income Recognized 
March 31, 2022                         
With no related allowance recorded:                         
Commercial  $1,736,752   $1,736,752   $-   $1,736,752   $- 
Residential   1,046,562    1,046,562    -    1,046,563    - 
Residential construction        -    -         - 
                          
With an allowance recorded:                         
Commercial  $-   $-   $-   $-   $- 
Residential   817,320    817,320    99,036    817,320    - 
Residential construction   -    -    -    -    - 
                          
Total:                         
Commercial  $1,736,752   $1,736,752   $-   $1,736,752   $- 
Residential   1,863,882    1,863,882    99,036    1,863,883    - 
Residential construction   -    -    -    -    - 
                          
December 31, 2021                         
With no related allowance recorded:                         
Commercial  $1,723,372   $1,723,372   $-   $1,053,865   $- 
Residential   1,591,368    1,591,368    -    2,731,421    - 
Residential construction   -    -    -    100,481    - 
                          
With an allowance recorded:                         
Commercial  $-   $-   $-   $-   $- 
Residential   957,288    957,288    105,384    726,449    - 
Residential construction   -    -    -    -    - 
                          
Total:                         
Commercial  $1,723,372   $1,723,372   $-   $1,053,865   $- 
Residential   2,548,656    2,548,656    105,384    3,457,870    - 
Residential construction   -    -    -    100,481    - 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)

 

3) Investments (Continued)

 

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 are summarized as follows:

 

   Commercial   Residential   Residential Construction   Total 
   March 31, 2022   December 31, 2021   March 31, 2022   December 31, 2021   March 31, 2022   December 31, 2021   March 31, 2022   December 31, 2021 
                                 
Performing  $41,514,870   $49,959,650   $44,688,856   $50,985,056   $193,151,868   $175,117,783   $279,355,594   $276,062,489 
Non-performing   1,736,752    1,723,372    1,863,882    2,548,656    -    -    3,600,634    4,272,028 
                                         
Total  $43,251,622   $51,683,022   $46,552,738   $53,533,712   $193,151,868   $175,117,783   $282,956,228   $280,334,517 

 

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 $254,000 and $236,000 as of March 31, 2022 and December 31, 2021, respectively.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 (Unaudited)