XML 22 R11.htm IDEA: XBRL DOCUMENT

Loans Held for Sale

6 Months Ended

Jun. 30, 2023

4) Loans Held for Sale

The Company elected the fair value option for loans held for sale. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on mortgage loans held for investment and is included in mortgage fee income on the condensed consolidated statement of earnings. See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.

The following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale:

	As of June 30, 2023			As of December 31, 2022
	As of June 30, 2023			As of December 31, 2022

Aggregate fair value	$	161,310,060		$	141,179,620
Unpaid principal balance		162,075,374			141,337,811
Unrealized loss		(765,314	)		(158,191	)

Mortgage Fee Income

Mortgage fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale of mortgage loans held for sale.

Major categories of mortgage fee income for loans held for sale are summarized as follows:

	2023			2022			2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Loan fees	$	5,986,802		$	7,950,227		$	10,375,215		$	15,037,410
Interest income		2,620,489			2,923,446			4,627,546			4,955,315
Secondary gains		19,298,213			37,161,287			37,259,571			76,763,900
Change in fair value of loan commitments		(151,382	)		(2,247,244	)		526,570			428,127
Change in fair value of loans held for sale		(1,401,738	)		(3,463,922	)		(607,123	)		(6,210,487	)
Provision for loan loss reserve		(273,631	)		(292,896	)		(114,020	)		(598,922	)
Mortgage fee income	$	26,078,753		$	42,030,898		$	52,067,759		$	90,375,343

Loan Loss Reserve

Repurchase demands from third party investors that correspond to mortgage loans previously held for sale and sold are reviewed and relevant data is captured so that an estimated future loss can be calculated. The key factors that are used in the estimated future loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a repurchase demand. In many instances, the Company is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

4) Loans Held for Sale (Continued)

The loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:

	As of June 30, 2023			As of December 31, 2022
Balance, beginning of period	$	1,725,667		$	2,447,139
Provision on current loan originations (1)		513,431			1,078,812
Charge-offs, net of recaptured amounts		(983,185	)		(1,800,284	)
Balance, end of period	$	1,255,913		$	1,725,667

(1)	Included in mortgage fee income

The Company maintains reserves for estimated losses on current production volumes. For the six month period ended June 30, 2023, $513,431 in reserves were added at a rate of 4.5 basis points per loan, the equivalent of $450 per $1,000,000 in loans originated. This is an increase over the six month period ended June 30, 2022, when reserves of $598,922 were added at a rate of 2.9 basis points per loan originated, the equivalent of $290 per $1,000,000 in loans originated. The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current production. Thus, the Company believes that the final loan loss reserve as of June 30, 2023, represents its best estimate for adequate loss reserves on loans sold.