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Investments | 9 Months Ended
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Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract] |
Investments | 3) Investments The Company’s investments as of September 30, 2023 are summarized as follows: Schedule of Investments
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses (1) |  |  | Allowance for Credit Losses |  |  | Estimated Fair Value |
September 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities, available for sale, at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ | 108,680,913 |  |  | $ | 5,981 |  |  | $ | (2,498,554 | ) |  | $ | - |  |  | $ | 106,188,340 |
Obligations of states and political subdivisions |  |  | 6,649,289 |  |  |  | 218 |  |  |  | (586,789 | ) |  |  | - |  |  |  | 6,062,718 |
Corporate securities including public utilities |  |  | 231,814,067 |  |  |  | 600,075 |  |  |  | (15,412,932 | ) |  |  | (211,500 | ) |  |  | 216,789,710 |
Mortgage-backed securities |  |  | 32,889,293 |  |  |  | 13,422 |  |  |  | (5,755,224 | ) |  |  | - |  |  |  | 27,147,491 |
Redeemable preferred stock |  |  | 250,000 |  |  |  | 10,000 |  |  |  | - |  |  |  | - |  |  |  | 260,000 |
Total fixed maturity securities available for sale |  | $ | 380,283,562 |  |  | $ | 629,696 |  |  | $ | (24,253,499 | ) |  | $ | (211,500 | ) |  | $ | 356,448,259 |
Equity securities at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ | 10,470,974 |  |  | $ | 2,684,920 |  |  | $ | (846,350 | ) |  |  |  |  |  | $ | 12,309,544 |
Total equity securities at estimated fair value |  | $ | 10,470,974 |  |  | $ | 2,684,920 |  |  | $ | (846,350 | ) |  |  |  |  |  | $ | 12,309,544 |
Mortgage loans held for investment at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 96,591,643 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential construction |  |  | 101,295,751 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 55,991,027 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Unamortized deferred loan fees, net |  |  | (1,629,546 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for credit losses |  |  | (2,612,944 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Net discounts |  |  | (328,833 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total mortgage loans held for investment |  | $ | 249,307,098 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for investment - net of accumulated depreciation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 38,034,997 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 146,656,466 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate held for investment |  | $ | 184,691,463 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 2,285,707 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 2,478,660 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate held for sale |  | $ | 4,764,367 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other investments and policy loans at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Policy loans |  | $ | 13,154,845 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Insurance assignments |  |  | 42,624,001 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal Home Loan Bank stock (2) |  |  | 2,699,300 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other investments |  |  | 9,330,532 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for credit losses for insurance assignments |  |  | (1,555,261 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total other investments and policy loans |  | $ | 66,253,417 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued investment income |  | $ | 12,266,695 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total investments |  | $ | 886,040,843 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) |  | Gross unrealized losses are net of allowance for credit losses
(2) |  | Includes $978,600 of Membership stock and $1,720,700 of Activity stock attributable to short-term borrowings and letters of credit.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The Company’s investments as of December 31, 2022 are summarized as follows:
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |
December 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities, available for sale, at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ | 93,182,210 |  |  | $ | 180,643 |  |  | $ | (2,685,277 | ) |  | $ | 90,677,576 |
Obligations of states and political subdivisions |  |  | 6,675,071 |  |  |  | 13,869 |  |  |  | (458,137 | ) |  |  | 6,230,803 |
Corporate securities including public utilities |  |  | 229,141,544 |  |  |  | 1,909,630 |  |  |  | (11,930,773 | ) |  |  | 219,120,401 |
Mortgage-backed securities |  |  | 33,501,686 |  |  |  | 168,700 |  |  |  | (4,100,674 | ) |  |  | 29,569,712 |
Redeemable preferred stock |  |  | 250,000 |  |  |  | 10,000 |  |  |  | - |  |  |  | 260,000 |
Total fixed maturity securities available for sale |  | $ | 362,750,511 |  |  | $ | 2,282,842 |  |  | $ | (19,174,861 | ) |  | $ | 345,858,492 |
Equity securities at estimated fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Industrial, miscellaneous and all other |  | $ | 9,942,265 |  |  | $ | 2,688,375 |  |  | $ | (948,114 | ) |  | $ | 11,682,526 |
Total equity securities at estimated fair value |  | $ | 9,942,265 |  |  | $ | 2,688,375 |  |  | $ | (948,114 | ) |  | $ | 11,682,526 |
Mortgage loans held for investment at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 93,355,623 |  |  |  |  |  |  |  |  |  |  |  |  |
Residential construction |  |  | 172,516,125 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 46,311,955 |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Unamortized deferred loan fees, net |  |  | (1,746,605 | ) |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for credit losses |  |  | (1,970,311 | ) |  |  |  |  |  |  |  |  |  |  |  |
Less: Net discounts |  |  | (342,860 | ) |  |  |  |  |  |  |  |  |  |  |  |
Total mortgage loans held for investment |  | $ | 308,123,927 |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for investment - net of accumulated depreciation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 38,437,960 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 152,890,656 |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate held for investment |  | $ | 191,328,616 |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 11,010,029 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 151,553 |  |  |  |  |  |  |  |  |  |  |  |  |
Total real estate held for sale |  | $ | 11,161,582 |  |  |  |  |  |  |  |  |  |  |  |  |
Other investments and policy loans at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Policy loans |  | $ | 13,095,473 |  |  |  |  |  |  |  |  |  |  |  |  |
Insurance assignments |  |  | 46,942,536 |  |  |  |  |  |  |  |  |  |  |  |  |
Federal Home Loan Bank stock (1) |  |  | 2,600,300 |  |  |  |  |  |  |  |  |  |  |  |  |
Other investments |  |  | 9,479,798 |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Allowance for credit losses for insurance assignments |  |  | (1,609,951 | ) |  |  |  |  |  |  |  |  |  |  |  |
Total other investments and policy loans |  | $ | 70,508,156 |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued investment income |  | $ | 10,299,826 |  |  |  |  |  |  |  |  |  |  |  |  |
Total investments |  | $ | 948,963,125 |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | Includes $938,500 of Membership stock and $1,661,800 of Activity stock attributable to short-term borrowings and letters of credit.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Fixed Maturity Securities The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of September 30, 2023, and December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations. 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 table below sets forth unrealized losses by duration with the fair value of the related fixed maturity securities. Schedule of Fair Value of Fixed Maturity Securities
|  | Unrealized Losses for Less than Twelve Months |  |  | Fair Value |  |  | Unrealized Losses for More than Twelve Months |  |  | Fair Value |  |  | Total Unrealized Loss |  |  | Combined Fair Value |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Securities And Obligations of U.S. Government Agencies |  | $ | 331,740 |  |  | $ | 36,115,986 |  |  | $ | 2,166,815 |  |  | $ | 69,967,155 |  |  | $ | 2,498,555 |  |  | $ | 106,083,141 |
Obligations of States and Political Subdivisions |  |  | 155,458 |  |  |  | 1,469,753 |  |  |  | 431,331 |  |  |  | 4,142,748 |  |  |  | 586,789 |  |  |  | 5,612,501 |
Corporate Securities |  |  | 4,092,910 |  |  |  | 86,409,480 |  |  |  | 11,320,021 |  |  |  | 106,047,158 |  |  |  | 15,412,931 |  |  |  | 192,456,638 |
Mortgage and other asset-backed securities |  |  | 123,790 |  |  |  | 4,627,445 |  |  |  | 5,631,434 |  |  |  | 22,003,452 |  |  |  | 5,755,224 |  |  |  | 26,630,897 |
Totals |  | $ | 4,703,898 |  |  | $ | 128,622,664 |  |  | $ | 19,549,601 |  |  | $ | 202,160,513 |  |  | $ | 24,253,499 |  |  | $ | 330,783,177 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Securities And Obligations of U.S. Government Agencies |  | $ | 2,685,277 |  |  | $ | 79,400,753 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,685,277 |  |  | $ | 79,400,753 |
Obligations of States and Political Subdivisions |  |  | 378,067 |  |  |  | 5,467,910 |  |  |  | 80,070 |  |  |  | 429,020 |  |  |  | 458,137 |  |  |  | 5,896,930 |
Corporate Securities |  |  | 10,935,114 |  |  |  | 162,995,969 |  |  |  | 995,659 |  |  |  | 5,781,822 |  |  |  | 11,930,773 |  |  |  | 168,777,791 |
Mortgage and other asset-backed securities |  |  | 2,884,731 |  |  |  | 19,909,907 |  |  |  | 1,215,943 |  |  |  | 6,978,745 |  |  |  | 4,100,674 |  |  |  | 26,888,652 |
Totals |  | $ | 16,883,189 |  |  | $ | 267,774,539 |  |  | $ | 2,291,672 |  |  | $ | 13,189,587 |  |  | $ | 19,174,861 |  |  | $ | 280,964,126 |
Relevant holdings were comprised of 816 securities with fair values aggregating 93.2% of the aggregate amortized cost as of September 30, 2023. Relevant holdings were comprised of 703 securities with fair values aggregating 93.1% of the aggregate amortized cost as of December 31, 2022. Credit loss provision (release) of $(1,741) and nil have been recognized for the three month periods ended September 30, 2023 and 2022, respectively. Credit loss provision (release) of $222,264 and nil have been recognized for the nine month periods ended September 30, 2023 and 2022, respectively. Credit losses are included in gains (losses) on investments and other assets on the condensed consolidated statements of earnings. Other unrealized losses for which no credit loss was recognized are primarily the result of the recent increases in interest rates. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Evaluation of Allowance for Credit Losses See Note 2 regarding the adoption of ASU 2016-13. On a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale to identify any potential credit losses. This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”) and other industry rating agencies. Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for credit loss, unless current market data or recent company news could lead to a credit downgrade. Securities with ratings of 3 to 5 are evaluated for credit loss. The evaluation involves assessing all facts and circumstances surrounding each security including, but not limited 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. Securities with a rating of 6 are automatically determined to be impaired and a credit loss is recognized in earnings. Where the decline in fair value of fixed maturity securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and the Company anticipates recovery of all contractual or expected cash flows, the Company does not consider these securities to have credit loss because the Company does not intend to sell these securities and it is not more likely than not the Company will be required to sell these securities before a recovery of amortized cost, which may be at maturity. If the Company intends to sell a fixed maturity security or if it is more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, a credit loss has occurred and the difference between the amortized cost and the fair value that relates to the expected credit loss is recognized as a loss in earnings, included in gains (losses) on investments and other assets on the condensed consolidated statements of earnings. If the Company does not intend to sell a debt security and it is less likely than not that the Company will be required to sell the debt security but the Company also does not expect to recover the entire amortized cost basis of the security, a credit loss is recognized in earnings for the amount of the expected credit loss with a corresponding allowance for credit losses as a contra-asset account. The credit loss is included in gains (losses) on investments and other assets on the condensed consolidated statements of earnings. The recognized credit loss is limited to the total unrealized loss on the security due to a change in credit. Amounts on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if the Company intends to sell a security or when it is more likely than not that the Company will be required to sell the security before the recovery of its amortized cost. The Company does not measure a credit loss allowance on accrued interest receivable, included in accrued investment income on the condensed consolidated balance sheets, as the Company writes off any accrued interest receivable balance to net investment income in a timely manner (after 90 days) when the Company has concerns regarding collectability. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Credit Quality Indicators The NAIC assigns designations to fixed maturity securities. These designations range from Class 1 (highest quality) to Class 6 (lowest quality). The NAIC designations are utilized by insurers in preparing their annual statutory statements. NAIC Class 1 and 2 are considered investment grade while the NAIC Class 3 through 6 designations are considered non-investment grade. Based on the NAIC designations, the Company had 98.2% and 97.7% of its fixed maturity securities rated investment grade as of September 30, 2023 and December 31, 2022, respectively. The following table summarizes the credit quality, by NAIC designation, of the Company’s fixed maturity securities available for sale, excluding redeemable preferred stock. Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation
|  | September 30, 2023 |  |  | December 31, 2022 |
NAIC Designation |  | Amortized Cost |  |  | Estimated Fair Value |  |  | Amortized Cost |  |  | Estimated Fair Value |
1 |  | $ | 210,224,246 |  |  | $ | 198,601,878 |  |  | $ | 197,753,818 |  |  | $ | 189,691,540 |
2 |  |  | 162,752,957 |  |  |  | 151,279,566 |  |  |  | 156,261,804 |  |  |  | 148,073,873 |
3 |  |  | 5,329,117 |  |  |  | 4,890,504 |  |  |  | 7,080,305 |  |  |  | 6,635,786 |
4 |  |  | 1,462,481 |  |  |  | 1,325,409 |  |  |  | 1,377,541 |  |  |  | 1,157,454 |
5 |  |  | 263,504 |  |  |  | 90,901 |  |  |  | 25,736 |  |  |  | 39,155 |
6 |  |  | 1,257 |  |  |  | 1 |  |  |  | 1,307 |  |  |  | 684 |
Total |  | $ | 380,033,562 |  |  | $ | 356,188,259 |  |  | $ | 362,500,511 |  |  | $ | 345,598,492 |
The following tables presents a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale: Schedule of Allowance for Credit Losses on Fixed Maturity Securities Available for Sale
|  | Nine Months Ended September 30, 2023 |
|  | U.S. Treasury Securities And Obligations of U.S. Government Agencies |  |  | Obligations of states and political subdivisions |  |  | Corporate securities |  |  | Mortgage-backed securities |  |  | Total |
Beginning balance - December 31, 2022 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Additions for credit losses not previously recorded |  |  | - |  |  |  | - |  |  |  | 179,500 |  |  |  | - |  |  |  | 179,500 |
Change in allowance on securities with previous allowance |  |  | - |  |  |  | - |  |  |  | 42,764 |  |  |  | - |  |  |  | 42,764 |
Reductions for securities sold during the period |  |  | - |  |  |  | - |  |  |  | (10,764 | ) |  |  | - |  |  |  | (10,764 | )
Reductions for securities with credit losses due to intent to sell |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Write-offs charged against the allowance |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Recoveries of amounts previously written off |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Ending Balance - September 30, 2023 |  | $ | - |  |  | $ | - |  |  | $ | 211,500 |  |  | $ | - |  |  | $ | 211,500 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued)
|  | Three Months Ended September 30, 2023 |
|  | U.S. Treasury Securities And Obligations of U.S. Government Agencies |  |  | Obligations of states and political subdivisions |  |  | Corporate securities |  |  | Mortgage-backed securities |  |  | Total |
Beginning balance - June 30, 2023 |  | $ | - |  |  | $ | - |  |  | $ | 224,005 |  |  | $ | - |  |  | $ | 224,005 |
Beginning balance |  | $ | - |  |  | $ | - |  |  | $ | 224,005 |  |  | $ | - |  |  | $ | 224,005 |
Additions for credit losses not previously recorded |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Change in allowance on securities with previous allowance |  |  | - |  |  |  | - |  |  |  | (1,741 | ) |  |  | - |  |  |  | (1,741 | )
Reductions for securities sold during the period |  |  | - |  |  |  | - |  |  |  | (10,764 | ) |  |  | - |  |  |  | (10,764 | )
Reductions for securities with credit losses due to intent to sell |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Write-offs charged against the allowance |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Recoveries of amounts previously written off |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Ending Balance - September 30, 2023 |  | $ | - |  |  | $ | - |  |  | $ | 211,500 |  |  | $ | - |  |  | $ | 211,500 |
Ending balance |  | $ | - |  |  | $ | - |  |  | $ | 211,500 |  |  | $ | - |  |  | $ | 211,500 |
The following table presents a roll forward of the Company’s cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale which was required to be presented prior to the adoption of ASU 2016-13: Schedule of Earnings on Fixed Maturity Securities
|  | 2022 |
Balance of credit-related OTTI at January 1 |  | $ | 264,977 |
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) |  |  | (39,502 | )
Securities due to an increase in expected cash flows |  |  | - |
Balance of credit-related OTTI at September 30 |  | $ | 225,475 |
The table below presents the amortized cost and the estimated fair value of fixed maturity securities available for sale as of September 30, 2023, by contractual maturity. Actual or 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. Schedule of Investments Classified by Contractual Maturity Date
|  | Amortized Cost |  |  | Estimated Fair Value |
Due in 1 year |  | $ | 6,818,008 |  |  | $ | 6,812,398 |
Due in 2-5 years |  |  | 160,874,392 |  |  |  | 155,802,499 |
Due in 5-10 years |  |  | 93,763,663 |  |  |  | 88,297,470 |
Due in more than 10 years |  |  | 85,688,206 |  |  |  | 78,128,401 |
Mortgage-backed securities |  |  | 32,889,293 |  |  |  | 27,147,491 |
Redeemable preferred stock |  |  | 250,000 |  |  |  | 260,000 |
Total |  | $ | 380,283,562 |  |  | $ | 356,448,259 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company had pledged a total of $92,437,113, at estimated fair value, of fixed maturity securities with the FHLB as of September 30, 2023. These pledged securities are used as collateral for any FHLB cash advances. As of September 30, 2023, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was $85,218,402. Information regarding sales of fixed maturity securities available for sale is presented as follows: Schedule of Major Categories of Net Investment Income
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Proceeds from sales |  | $ | 207,522 |  |  | $ | 1,198,240 |  |  | $ | 1,163,132 |  |  | $ | 1,886,891 |
Gross realized gains |  |  | - |  |  |  | 21,926 |  |  |  | 11,257 |  |  |  | 24,281 |
Gross realized losses |  |  | (3,368 | ) |  |  | (24,811 | ) |  |  | (57,472 | ) |  |  | (32,656 | )
Assets on deposit with life insurance regulatory authorities as required by law were as follows: Schedule of Assets on Deposit With Life Insurance
|  | As of September 30, 2023 |  |  | As of December 31, 2022 |
Fixed maturity securities available for sale |  | $ | 6,248,114 |  |  | $ | 8,817,959 |
Cash and cash equivalents |  |  | 1,956,777 |  |  |  | 2,214,206 |
Total |  | $ | 8,204,891 |  |  | $ | 11,032,165 |
There were no investments, aggregated by issuer, of more than 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) as of September 30, 2023, 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 assets 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 resources. The geographic locations and asset classes of investments are 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 where the geographic location does not warrant full-time staff or through strategic lease-up periods. The Company generally looks to acquire assets that are in regions expected to have high growth in employment and population and that provide operational efficiencies. The Company currently owns and operates nine commercial properties in three states. These properties include office buildings, flex office space, and the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company uses bank debt in strategic cases, primarily where it is anticipated to improve yields, or facilitate the acquisition of higher quality assets or asset class diversification. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The aggregated net book value of commercial real estate serving as collateral for bank loans was $125,641,402 and $129,330,119 as of September 30, 2023, and December 31, 2022, respectively. The associated bank loan carrying values totaled $98,250,725 and $97,112,131 as of September 30, 2023, and December 31, 2022, respectively. During the three and nine month periods ended September 30, 2023, and 2022, 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. During the three month periods ended September 30, 2023, and 2022, the Company recorded depreciation expense on commercial real estate held for investment of $1,572,494 and $1,604,195, respectively, and of $4,715,322 and $4,593,468 during the nine month periods ended September 30, 2023, and 2022, respectively. Commercial real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings. The Company’s commercial real estate held for investment is summarized as follows as of the respective dates indicated: Schedule of Commercial Real Estate Investment
|  | Net Book Value |  |  | Total Square Footage |
|  | September 30, 2023 |  |  | December 31, 2022 |  |  | September 30, 2023 |  |  | December 31, 2022 |
Utah (1) |  | $ | 143,735,609 |  |  | $ | 147,627,946 |  |  |  | 625,920 |  |  |  | 625,920 |
Louisiana |  |  | 19,416 |  |  |  | 2,380,847 |  |  |  | 1,622 |  |  |  | 31,778 |
Mississippi |  |  | 2,901,441 |  |  |  | 2,881,863 |  |  |  | 19,694 |  |  |  | 19,694 |
|  | $ | 146,656,466 |  |  | $ | 152,890,656 |  |  |  | 647,236 |  |  |  | 677,392 |
(1) | Includes Center53
The Company’s commercial real estate held for sale is summarized as follows as of the respective dates indicated:
|  | Net Book Value |  |  | Total Square Footage |
|  | September 30, 2023 |  |  | December 31, 2022 |  |  | September 30, 2023 |  |  | December 31, 2022 |
Louisiana |  | $ | 2,327,107 |  |  | $ | - |  |  |  | 30,156 |  |  |  | - |
Mississippi (1) |  |  | 151,553 |  |  |  | 151,553 |  |  |  | - |  |  |  | - |
|  | $ | 2,478,660 |  |  | $ | 151,553 |  |  |  | 30,156 |  |  |  | - |
(1) | Consists of approximately 93 acres of undeveloped land
These properties are being marketed with the assistance of commercial real estate brokers in Mississippi and Louisiana. Residential Real Estate Held for Investment and Held for Sale The Company occasionally acquires a small portfolio of residential homes primarily because of loan foreclosures. The Company has the option to sell these properties or to continue to hold them for expected cash flow and price appreciation. The Company also invests in residential subdivision development. The Company established Security National Real Estate Services (“SNRE”) to manage its residential property portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the Company’s entire residential property portfolio. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) During the three and nine month periods ended September 30, 2023, and 2022 the Company did not record any impairment losses on residential real estate held for sale or held for investment. Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings. During the three month periods ended September 30, 2023, and 2022, the Company recorded depreciation expense on residential real estate held for investment of $2,648 and $2,648, respectively, and of $7,944 and $7,944 during the nine month periods ended September 30, 2023, and 2022, respectively. Residential real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings. The Company’s residential real estate held for investment is summarized as follows as of the respective dates indicated: Schedule of Residential Real Estate Investment
|  | Net Book Value |
|  | September 30, 2023 |  |  | December 31, 2022 |
Utah (1) |  | $ | 38,034,997 |  |  | $ | 38,437,960 |
|  | $ | 38,034,997 |  |  | $ | 38,437,960 |
(1) | Includes residential subdivision development
The following table presents additional information regarding the Company’s residential subdivision development in Utah:
|  | September 30, 2023 |  |  | December 31, 2022 |
Lots developed |  |  | 50 |  |  |  | 80 |
Lots to be developed |  |  | 1,080 |  |  |  | 1,131 |
Book Value |  | $ | 37,846,685 |  |  | $ | 38,241,705 |
The Company’s residential real estate held for sale is summarized as follows as of the respective dates indicated:
|  | Net Book Value |
|  | September 30, 2023 |  |  | December 31, 2022 |
Utah |  |  | $ 2,285,707 | (1) |  | $ | 11,010,029 |
|  | $ | 2,285,707 |  |  | $ | 11,010,029 |
(1) | Unimproved land
The net book value of foreclosed residential real estate included in residential real estate held for sale was nil and $11,010,029 as of September 30, 2023, and December 31, 2022, respectively. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (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 September 30, 2023, real estate owned and occupied by the Company is summarized as follows: Schedule of Real Estate Owned and Occupied by the Company
Location |  | Business Segment |  | Approximate Square Footage |  |  | Square Footage Occupied by the Company |
433 Ascension Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2 (1) |  | Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales |  |  | 221,000 |  |  |  | 50 | %
1044 River Oaks Dr., Flowood, MS (1) |  | Life Insurance Operations |  |  | 19,694 |  |  |  | 28 | %
1818 Marshall Street, Shreveport, LA (2) |  | Life Insurance Operations |  |  | 12,274 |  |  |  | 100 | %
909 Foisy Street, Alexandria, LA (2) |  | Life Insurance Sales |  |  | 8,059 |  |  |  | 100 | %
812 Sheppard Street, Minden, LA (2) |  | Life Insurance Sales |  |  | 1,560 |  |  |  | 100 | %
1550 N 3rd Street, Jena, LA (2) |  | Life Insurance Sales |  |  | 1,737 |  |  |  | 100 | %
(1) | Included in real estate held for investment on the condensed consolidated balance sheets
(2) | 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 the loans 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 the relevant debtors’ ability to honor obligations is dependent upon the economic stability of the geographic region in which the debtors do business or are employed. As of September 30, 2023, the Company had 45%, 12%, 9%, 7% and 6%, of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, and Arizona, respectively. As of December 31, 2022, the Company had 64%, 10%, 5% and 5% of its mortgage loans from borrowers located in the states of Utah, Florida, California, and Texas, 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 credit 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 terms 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 requires that loans not exceed 80% of the fair market value of the respective loan collateral. For loans of more than 80% of the fair market value of the respective loan collateral, additional collateral or mortgage insurance by an approved third-party insurer is required. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Evaluation of Allowance for Credit Losses See Note 2 regarding the adoption of ASU 2016-13. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage loans held for investment to present the net amount expected to be collected. The Company reports in net earnings, as a credit loss expense, the amount necessary to adjust the allowance for credit losses for the Company’s current estimate of expected credit losses on mortgage loans held for investment. This credit loss expense is included in other expenses on the condensed consolidated statements of earnings. Once a mortgage loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and reverse any interest income that had been accrued. Given this policy, the Company does not measure a credit loss allowance on accrued interest receivable. Accrued interest receivable is included in accrued investment income on the condensed consolidated balance sheets. Payments received for mortgage loans on a non-accrual status are recognized when received. The interest income recognized from payments received for mortgage loans on a non-accrual status was immaterial. Accrual of interest resumes if a mortgage loan is brought current. Interest not accrued on these loans totaled approximately $249,000 and $226,000 as of September 30, 2023, and December 31, 2022, respectively. The Company measures expected credit losses based on the fair value of the collateral when the Company determines that foreclosure is probable. When a mortgage loan becomes delinquent, the Company proceeds to foreclose and all expenses for foreclosure are expensed as incurred. Once foreclosed, the property is classified as real estate held for investment or held for sale. To determine the allowance for credit 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 secondarily on the borrower’s (or guarantor’s) ability to repay. Commercial loans are evaluated for credit loss by analyzing loan attributes that are predictors for future credit losses. The Company uses a combination of the debt service coverage ratio (“DSCR”) and loan to value (“LTV”) to group similar loans. The Company applies a future loss factor to the outstanding balance of each group to arrive at the allowance for credit loss. Residential — These loans are secured by first and second mortgages on single-family dwellings. The borrower’s ability to repay is sensitive to the life events and the general economic condition of the region. Where loan to value exceeds 80%, the loan is generally guaranteed by private mortgage insurance, the FHA, or VA. The Company uses a third-party to provide a monthly analysis of its residential portfolio for credit losses. The third party uses the Company’s current loan data and runs it through various models to project cash flows and provide a projected life of loan loss. The models consider loan features such as loan type, loan to value, payment status, age, and current property values. The Company also considers historical delinquency rates and current unemployment trends. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Residential construction (including land acquisition and development) – These loans are 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, and factor in estimates of the value of construction projects upon completion. 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 acquisition and development loans are underwritten in accordance with the Company’s underwriting policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These loans are 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. To determine the allowance for credit losses on residential construction mortgage loans, the Company considers historical activity and housing market trends. Given the continued volatility in the housing market, the Company has adjusted its credit loss analysis. The following table presents a roll forward of the allowance for credit losses as of the dates indicated: Schedule of Allowance for Loan Losses
|  | Commercial |  |  | Residential |  |  | Residential Construction |  |  | Total |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance - January 1, 2023 |  | $ | 187,129 |  |  | $ | 1,739,980 |  |  | $ | 43,202 |  |  | $ | 1,970,311 |
Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-13) (1) |  |  | 555,807 |  |  |  | (192,607 | ) |  |  | 301,830 |  |  |  | 665,030 |
Change in provision for credit losses (2) |  |  | 67,246 |  |  |  | 52,797 |  |  |  | (142,440 | ) |  |  | (22,397 | )
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Ending balance - September 30, 2023 |  | $ | 810,182 |  |  | $ | 1,600,170 |  |  | $ | 202,592 |  |  | $ | 2,612,944 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance - January 1, 2022 |  | $ | 187,129 |  |  | $ | 1,469,571 |  |  | $ | 43,202 |  |  | $ | 1,699,902 |
Change in provision for credit losses (2) |  |  | - |  |  |  | 270,409 |  |  |  | - |  |  |  | 270,409 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Ending balance - December 31, 2022 |  | $ | 187,129 |  |  | $ | 1,739,980 |  |  | $ | 43,202 |  |  | $ | 1,970,311 |
(1) | See Note 2 of the notes to the condensed consolidated financial statements
(2) | Included in other expenses on the condensed consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The following table presents the aging of mortgage loans held for investment by loan type as of the dates indicated: Schedule of Aging of Mortgage Loans
|  | Commercial |  |  | Residential |  |  | Residential Construction |  |  | Total |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
30-59 days past due |  | $ | 3,139,403 |  |  | $ | 3,816,822 |  |  | $ | 805,766 |  |  | $ | 7,761,991 |
60-89 days past due |  |  | - |  |  |  | 1,795,326 |  |  |  | - |  |  |  | 1,795,326 |
Over 90 days past due (1) |  |  | 1,646,508 |  |  |  | 3,778,582 |  |  |  | 1,005,417 |  |  |  | 6,430,507 |
In process of foreclosure (1) |  |  | - |  |  |  | 276,580 |  |  |  | - |  |  |  | 276,580 |
Total past due |  |  | 4,785,911 |  |  |  | 9,667,310 |  |  |  | 1,811,183 |  |  |  | 16,264,404 |
Current |  |  | 51,205,116 |  |  |  | 86,924,333 |  |  |  | 99,484,568 |  |  |  | 237,614,017 |
Total mortgage loans |  |  | 55,991,027 |  |  |  | 96,591,643 |  |  |  | 101,295,751 |  |  |  | 253,878,421 |
Allowance for credit losses |  |  | (810,182 | ) |  |  | (1,600,170 | ) |  |  | (202,592 | ) |  |  | (2,612,944 | )
Unamortized deferred loan fees, net |  |  | (145,572 | ) |  |  | (1,129,517 | ) |  |  | (354,457 | ) |  |  | (1,629,546 | )
Unamortized discounts, net |  |  | (220,276 | ) |  |  | (108,557 | ) |  |  | - |  |  |  | (328,833 | )
Net mortgage loans held for investment |  | $ | 54,814,997 |  |  | $ | 93,753,399 |  |  | $ | 100,738,702 |  |  | $ | 249,307,098 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
30-59 days past due |  | $ | 1,000,000 |  |  | $ | 3,553,390 |  |  | $ | - |  |  | $ | 4,553,390 |
60-89 days past due |  |  | - |  |  |  | 814,184 |  |  |  | - |  |  |  | 814,184 |
Over 90 days past due (1) |  |  | - |  |  |  | 1,286,211 |  |  |  | - |  |  |  | 1,286,211 |
In process of foreclosure (1) |  |  | 405,000 |  |  |  | 876,174 |  |  |  | - |  |  |  | 1,281,174 |
Total past due |  |  | 1,405,000 |  |  |  | 6,529,959 |  |  |  | - |  |  |  | 7,934,959 |
Current |  |  | 44,906,955 |  |  |  | 86,825,664 |  |  |  | 172,516,125 |  |  |  | 304,248,744 |
Total mortgage loans |  |  | 46,311,955 |  |  |  | 93,355,623 |  |  |  | 172,516,125 |  |  |  | 312,183,703 |
Allowance for credit losses |  |  | (187,129 | ) |  |  | (1,739,980 | ) |  |  | (43,202 | ) |  |  | (1,970,311 | )
Unamortized deferred loan fees, net |  |  | (199,765 | ) |  |  | (1,212,994 | ) |  |  | (333,846 | ) |  |  | (1,746,605 | )
Unamortized discounts, net |  |  | (230,987 | ) |  |  | (111,873 | ) |  |  | - |  |  |  | (342,860 | )
Net mortgage loans held for investment |  | $ | 45,694,074 |  |  | $ | 90,290,776 |  |  | $ | 172,139,077 |  |  | $ | 308,123,927 |
(1) | Interest income is not recognized on loans which are more than 90 days past due or in foreclosure.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Credit Quality Indicators The Company evaluates and monitors the credit quality of its commercial loans by analyzing loan to value (“LTV”) and debt service coverage ratios (“DSCR”). Monitoring a commercial mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2023: Schedule of Commercial Mortgage Loans By Credit Quality Indicator
Credit Quality Indicator |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Total |  |  | % of Total |
LTV: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less than 65% |  | $ | 17,525,000 |  |  | $ | 13,396,458 |  |  | $ | 3,800,378 |  |  | $ | - |  |  | $ | 2,989,026 |  |  | $ | 6,796,621 |  |  | $ | 44,507,483 |  |  |  | 79.49 | %
65% to 80% |  |  | - |  |  |  | 4,585,706 |  |  |  | 1,050,000 |  |  |  | 4,913,313 |  |  |  | - |  |  |  | - |  |  |  | 10,549,019 |  |  |  | 18.84 | %
Greater than 80% |  |  | - |  |  |  | 529,525 |  |  |  | 405,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 934,525 |  |  |  | 1.67 | %
Total |  | $ | 17,525,000 |  |  | $ | 18,511,689 |  |  | $ | 5,255,378 |  |  | $ | 4,913,313 |  |  | $ | 2,989,026 |  |  | $ | 6,796,621 |  |  | $ | 55,991,027 |  |  |  | 100.00 | %
DSCR |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
>1.20x |  | $ | 5,725,000 |  |  | $ | 1,000,000 |  |  | $ | 1,750,000 |  |  | $ | 4,913,313 |  |  | $ | 2,989,026 |  |  | $ | 2,754,604 |  |  | $ | 19,131,943 |  |  |  | 34.17 | %
1.00x - 1.20x |  |  | 5,300,000 |  |  |  | 8,496,130 |  |  |  | 3,505,378 |  |  |  | - |  |  |  | - |  |  |  | 4,042,017 |  |  |  | 21,343,525 |  |  |  | 38.12 | %
<1.00x |  |  | 6,500,000 |  |  |  | 9,015,559(1) | (1) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,515,559 |  |  |  | 27.71 | %
Total |  | $ | 17,525,000 |  |  | $ | 18,511,689 |  |  | $ | 5,255,378 |  |  | $ | 4,913,313 |  |  | $ | 2,989,026 |  |  | $ | 6,796,621 |  |  | $ | 55,991,027 |  |  |  | 100.00 | %
(1) | Commercial construction loan
The Company evaluates and monitors the credit quality of its residential mortgage loans by analyzing loan performance. The Company defines non-performing mortgage loans as loans more than 90 days past due and on a non-accrual status. Monitoring a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2023:
Credit Quality Indicator |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Total |  |  | % of Total |
Performance Indicators: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 7,788,450 |  |  | $ | 55,306,009 |  |  | $ | 7,249,701 |  |  | $ | 7,495,836 |  |  | $ | 2,808,390 |  |  | $ | 11,888,093 |  |  | $ | 92,536,479 |  |  |  | 95.80 | %
Non-performing (1) |  |  | 324,111 |  |  |  | 838,669 |  |  |  | 741,534 |  |  |  | 800,486 |  |  |  | - |  |  |  | 1,350,364 |  |  |  | 4,055,164 |  |  |  | 4.20 | %
Total |  | $ | 8,112,561 |  |  | $ | 56,144,678 |  |  | $ | 7,991,235 |  |  | $ | 8,296,322 |  |  | $ | 2,808,390 |  |  | $ | 13,238,457 |  |  | $ | 96,591,643 |  |  |  | 100.00 | %
(1) | Includes residential mortgage loans in the process of foreclosure of $276,580 as of September 30, 2023
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The company evaluates and monitors the credit quality of its residential construction loans (including land acquisition and development loans) by analyzing LTV and loan performance. Monitoring a residential construction mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The aggregate unpaid principal balance of residential construction mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2023: Schedule of Residential Construction Mortgage Loans
Credit Quality Indicator |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | Total |  |  | % of Total |
Performance Indicators: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 48,525,276 |  |  | $ | 27,213,555 |  |  | $ | 24,551,503 |  |  | $ | 100,290,334 |  |  |  | 99.01 | %
Non-performing |  |  | - |  |  |  | 1,005,417 |  |  |  | - |  |  |  | 1,005,417 |  |  |  | 0.99 | %
Total |  | $ | 48,525,276 |  |  | $ | 28,218,972 |  |  | $ | 24,551,503 |  |  | $ | 101,295,751 |  |  |  | 100.00 | %
LTV: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less than 65% |  | $ | 29,476,916 |  |  | $ | 8,675,281 |  |  | $ | 17,117,181 |  |  | $ | 55,269,378 |  |  |  | 54.56 | %
65% to 80% |  |  | 19,048,360 |  |  |  | 19,543,691 |  |  |  | 7,434,322 |  |  |  | 46,026,373 |  |  |  | 45.44 | %
Greater than 80% |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.00 | %
Total |  | $ | 48,525,276 |  |  | $ | 28,218,972 |  |  | $ | 24,551,503 |  |  | $ | 101,295,751 |  |  |  | 100.00 | %
Insurance Assignments The following table presents the aging of insurance assignments, included in other investments and policy loans on the condensed consolidated balance sheets: Schedule of Aging of Insurance Assignments
|  | As of September 30, 2023 |  |  | As of December 31, 2022 |
30-59 days past due |  | $ | 9,374,806 |  |  | $ | 10,621,443 |
60-89 days past due |  |  | 3,591,685 |  |  |  | 3,997,484 |
Over 90 days past due |  |  | 4,611,748 |  |  |  | 5,813,013 |
Total past due |  |  | 17,578,239 |  |  |  | 20,431,941 |
Current |  |  | 25,045,762 |  |  |  | 26,510,594 |
Total insurance assignments |  |  | 42,624,001 |  |  |  | 46,942,536 |
Allowance for credit losses |  |  | (1,555,261 | ) |  |  | (1,609,951 | )
Net insurance assignments |  | $ | 41,068,740 |  |  | $ | 45,332,585 |
The Company records an allowance for credit losses when the insurance assignment is funded. Once an insurance assignment moves to 90 days or legal proceedings, it is monitored for write-off and collectability, and any adjustments to the allowance are recorded at that time. See Note 2 regarding the adoption of ASU 2016-13. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) The following table presents a roll forward of the allowance for credit losses for insurance assignments as of the dates indicated: Schedule of Allowance for Credit Losses
|  | Allowance |
Beginning balance - January 1, 2023 |  | $ | 1,609,951 |
Change in provision for credit losses (1) |  |  | 667,260 |
Charge-offs |  |  | (721,950 | )
Ending balance - September 30, 2023 |  | $ | 1,555,261 |
Beginning balance - January 1, 2022 |  | $ | 1,686,218 |
Change in provision for credit losses (1) |  |  | 889,480 |
Charge-offs |  |  | (965,747 | )
Ending balance - December 31, 2022 |  | $ | 1,609,951 |
(1) | Included in other expenses on the condensed consolidated statements of earnings
Investment Related Earnings The following table presents the realized gains and losses from sales, calls, and maturities, and unrealized gains and losses on equity securities from investments and other assets: Schedule of Gain (Loss) on Investments
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross realized gains |  | $ | 37,565 |  |  | $ | 30,121 |  |  | $ | 54,619 |  |  | $ | 205,755 |
Gross realized losses |  |  | (10,383 | ) |  |  | (26,203 | ) |  |  | (102,182 | ) |  |  | (36,961 | )
Net credit loss (provision) release |  |  | 1,740 |  |  |  | - |  |  |  | (222,264 | ) |  |  | - |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gains (losses) on securities sold |  |  | 324,009 |  |  |  | (131,472 | ) |  |  | 277,057 |  |  |  | (60,154 | )
Unrealized losses on securities held at the end of the period |  |  | (1,321,511 | ) |  |  | (1,383,627 | ) |  |  | (423,448 | ) |  |  | (4,097,049 | )
Real estate held for investment and sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross realized gains |  |  | 36,166 |  |  |  | - |  |  |  | 197,194 |  |  |  | 1,260,548 |
Gross realized losses |  |  | - |  |  |  | (727,370 | ) |  |  | - |  |  |  | (825,593 | )
Other assets, including call and put option derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross realized gains |  |  | - |  |  |  | 59,599 |  |  |  | 214,348 |  |  |  | 632,082 |
Gross realized losses |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | (932,414 | ) |  | $ | (2,178,952 | ) |  | $ | (4,676 | ) |  | $ | (2,921,372 | )
The 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. Net realized gains and losses includes gains and losses by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of $452,115 and $640,593 in net losses for the three month periods ended September 30, 2023, and 2022, respectively, and of $200,605 and $1,636,469 in net losses for the nine month periods ended September 30, 2023, and 2022, respectively. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited) 3) Investments (Continued) Major categories of net investment income were as follows:
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Fixed maturity securities available for sale |  | $ | 4,242,185 |  |  | $ | 3,188,521 |  |  | $ | 12,398,685 |  |  | $ | 8,636,387 |
Equity securities |  |  | 167,348 |  |  |  | 139,412 |  |  |  | 448,564 |  |  |  | 382,246 |
Mortgage loans held for investment |  |  | 9,842,845 |  |  |  | 10,477,672 |  |  |  | 27,797,908 |  |  |  | 27,682,315 |
Real estate held for investment and sale |  |  | 3,291,047 |  |  |  | 3,918,310 |  |  |  | 11,553,643 |  |  |  | 10,970,535 |
Policy loans |  |  | 191,843 |  |  |  | 213,520 |  |  |  | 599,498 |  |  |  | 727,103 |
Insurance assignments |  |  | 4,340,644 |  |  |  | 4,218,184 |  |  |  | 13,570,659 |  |  |  | 13,708,894 |
Other investments |  |  | 213,560 |  |  |  | 181,597 |  |  |  | 555,720 |  |  |  | 350,603 |
Cash and cash equivalents |  |  | 1,083,241 |  |  |  | 514,869 |  |  |  | 2,651,148 |  |  |  | 698,601 |
Gross investment income |  |  | 23,372,713 |  |  |  | 22,852,085 |  |  |  | 69,575,825 |  |  |  | 63,156,684 |
Investment expenses |  |  | (4,124,250 | ) |  |  | (4,249,015 | ) |  |  | (12,380,505 | ) |  |  | (13,388,020 | )
Net investment income |  | $ | 19,248,463 |  |  | $ | 18,603,070 |  |  | $ | 57,195,320 |  |  | $ | 49,768,664 |
Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $372,277 and $675,259 for the three month periods ended September 30, 2023 and 2022, respectively, and of $2,224,629 and $1,882,502 for the nine month periods ended September 30, 2023 and 2022, 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. Accrued Investment Income Accrued investment income consists of the following: Schedule of Accrued Investment Income
|  | As of September 30, 2023 |  |  | As of December 31, 2022 |
Fixed maturity securities available for sale |  | $ | 4,343,327 |  |  | $ | 3,563,767 |
Equity securities |  |  | 12,729 |  |  |  | 14,496 |
Mortgage loans held for investment |  |  | 4,732,717 |  |  |  | 3,220,709 |
Real estate held for investment |  |  | 3,158,708 |  |  |  | 3,455,305 |
Policy Loans |  |  | 4,463 |  |  |  | 37,951 |
Cash and cash equivalents |  |  | 14,751 |  |  |  | 7,598 |
Total accrued investment income |  | $ | 12,266,695 |  |  | $ | 10,299,826 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2023 (Unaudited)

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