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Loans Held for Sale

9 Months Ended

Sep. 30, 2025

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. 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 September 30, 2025		As of December 31, 2024

Aggregate fair value	$	159,460,525	$	131,181,148
Unpaid principal balance		156,916,889		128,948,072
Unrealized gain		2,543,636		2,233,076

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:

	2025			2024			2025			2024
	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Loan fees	$	6,670,934		$	7,358,830		$	18,634,088		$	20,245,527
Interest income		2,500,007			2,357,379			6,533,686			6,104,113
Secondary gains		20,378,078			17,982,124			57,518,242			51,387,693
Change in fair value of loan commitments		(202,896	)		(179,836	)		404,048			811,765
Change in fair value of loans held for sale		10,709			2,959,729			960,050			3,855,914
Provision for loan loss reserve		(217,587	)		(254,134	)		(616,524	)		(729,734	)
Mortgage fee income	$	29,139,245		$	30,224,092		$	83,433,590		$	81,675,278

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2025 (Unaudited)

4) Loans Held for Sale (Continued)

Loan Loss Reserve

Repurchase demands (“demand(s)”) from third party investors for 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 demand. In many instances, the Company can resolve the issues relating to the 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:

	As of September 30, 2025			As of December 31, 2024
Balance, beginning of period	$	696,626		$	547,233
Provision on current loan originations (1)		616,524			932,154
Additional provision (2)		40,000			-
Charge-offs, net of recaptured amounts		(764,281	)		(782,761	)
Balance, end of period	$	588,869		$	696,626

(1)

Included in mortgage fee income

(2)

Included in other expenses

The Company maintains reserves for estimated losses on current production volumes. For the nine-month period ended September 30, 2025, $616,524 in reserves were added at a rate of 3.5 basis points per loan, the equivalent of $350 per $1,000,000 in loans originated. 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. The Company monitors market data and trends, and economic conditions (including forecasts) and uses its own experience to determine adequate loss reserves on current production.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2025 (Unaudited)