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Loans Held for Sale

12 Months Ended

Dec. 31, 2024

3) 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 consolidated statement of earnings. Included in loans held for sale are loans in the process of foreclosure with an aggregate unpaid principal balance of nil and $1,636,090 as of December 31, 2024 and 2023, respectively. See Note 17 of the Notes to 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.

	2024		2023
	December 31,
	2024		2023
Aggregate fair value	$	131,181,148	$	126,549,190
Unpaid principal balance		128,948,072		127,185,867
Unrealized gain (loss)		2,233,076		(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:

	2024			2023
	Years Ended December 31
	2024			2023
Loan fees	$	26,343,919		$	21,724,456
Interest income		8,192,353			9,547,741
Secondary gains		70,354,845			68,505,014
Change in fair value of loan commitments		729,948			(1,123,615	)
Change in fair value of loans held for sale		2,869,729			(478,460	)
Provision for loan loss reserve		(932,154	)		(27,164	)
Mortgage fee income	$	107,558,640		$	98,147,972

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2024 and 2023

3) Loans Held for Sale (Continued)

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:

	December 31,
	2024			2023
Beginning Balance	$	547,233		$	1,725,667
Provision for current loan originations (1)		932,154			27,164
Charge-offs, net of recaptured amounts		(782,761	)		(1,205,598	)
Ending Balance	$	696,626		$	547,233

⁽¹⁾

Included in Mortgage fee income on the consolidated statements of earnings

The Company maintains reserves for estimated losses on current production volumes. For 2024, $932,154 in reserves were added at a rate of 4.1 basis points per loan, the equivalent of $410 per $1,000,000 in loans originated. This is a decrease over 2023, when $27,164 in reserves were added at a rate of 4.3 basis points per loan originated, the equivalent of $430 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 Consolidated Financial Statements

Years Ended December 31, 2024 and 2023