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Loans Held for Sale | 9 Months Ended
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Sep. 30, 2024
Loans Held For Sale |
Loans Held for Sale | 4) Loans Held for Sale The Company’s loans held for sale portfolio is valued using the fair value option. 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 recognition of mortgage loan interest income and is included in mortgage fee income on the condensed consolidated statement of earnings. Included in loans held for sale are loans in the process of foreclosure with an aggregate unpaid principal balance of $332,848 and $1,636,090 as of September 30, 2024 and December 31, 2023, respectively. 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: Schedule of Aggregate Fair Value Loans Held for Sale
|  | As of September 30, 2024 |  |  | As of December 31, 2023 |
Aggregate fair value |  | $ | 142,897,741 |  |  | $ | 126,549,190 |
Unpaid principal balance |  |  | 139,678,479 |  |  |  | 127,185,867 |
Unrealized gain (loss) |  |  | 3,219,262 |  |  |  | (636,677 | )
Mortgage Fee Income Mortgage fee income consists of origination fees, processing fees, interest income and 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: Schedule of Mortgage Fee Income for Loans Held for Sale
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Loan fees |  | $ | 7,358,830 |  |  | $ | 6,033,227 |  |  | $ | 20,245,527 |  |  | $ | 16,408,443 |
Interest income |  |  | 2,357,379 |  |  |  | 2,637,971 |  |  |  | 6,104,113 |  |  |  | 7,265,516 |
Secondary gains |  |  | 17,982,124 |  |  |  | 17,625,394 |  |  |  | 51,387,693 |  |  |  | 54,884,965 |
Change in fair value of loan commitments |  |  | (179,836 | ) |  |  | (1,504,286 | ) |  |  | 811,765 |  |  |  | (977,716 | )
Change in fair value of loans held for sale |  |  | 2,959,729 |  |  |  | (108,676 | ) |  |  | 3,855,914 |  |  |  | (715,799 | )
Provision for loan loss reserve |  |  | (254,134 | ) |  |  | 252,389 |  |  |  | (729,734 | ) |  |  | 138,369 |
Mortgage fee income |  | $ | 30,224,092 |  |  | $ | 24,936,019 |  |  | $ | 81,675,278 |  |  | $ | 77,003,778 |
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 can resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor. The loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows: Schedule of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses
|  | As of September 30, 2024 |  |  | As of December 31, 2023 |
Balance, beginning of period |  | $ | 547,233 |  |  | $ | 1,725,667 |
Provision on current loan originations (1) |  |  | 729,734 |  |  |  | 27,164 |
Charge-offs, net of recaptured amounts |  |  | (444,882 | ) |  |  | (1,205,598 | )
Balance, end of period |  | $ | 832,085 |  |  | $ | 547,233 |
(1) | Included in mortgage fee income
The Company maintains reserves for estimated losses on current production volumes. For the nine month period ended September 30, 2024, $729,734 in reserves were added at a rate of 4.2 basis points per loan, the equivalent of $420 per $1,000,000 in loans originated. This is a decrease over the nine month period ended September 30, 2023, when reserves of $770,220 were added at a rate of 4.5 basis points per loan originated, the equivalent of $450 per $1,000,000 in loans originated. The Company monitors market data and trends, economic conditions (including forecasts), and its own experience to maintain adequate loss reserves on current production. SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2024 (Unaudited)

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