Investments Footnote

3 Months Ended

Mar. 31, 2012

SEC Schedule, Article 12-15, Summary of Investments - Other than Investments in Related Parties

Summary of Investments, Other than Investments in Related Parties [Text Block]

3)        Investments

The Company’s investments in fixed maturity securities held-to-maturity and equity securities available for sale as of March 31, 2012 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2012:
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$	2,815,824	$	478,916	$	-		$	3,294,740
Obligations of states and political subdivisions		3,032,908		344,615		(7,608	)		3,369,915
Corporate securities including public utilities		116,853,730		11,342,155		(1,181,163	)		127,014,722
Mortgage-backed securities		6,458,035		364,055		(288,010	)		6,534,080
Redeemable preferred stock		1,510,878		57,472		(26,800	)		1,541,550
Total fixed maturity securities held to maturity	$	130,671,375	$	12,587,213	$	(1,503,581	)	$	141,755,007

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2012:
Equity securities available for sale at estimated fair value:
Non-redeemable preferred stock	$	20,281		$	169	$	(900	)	$	19,550
Common stock:
Industrial, miscellaneous and all other		6,322,732			397,354		(1,015,812	)		5,704,274
Total equity securities available for sale at estimated fair value	$	6,343,013		$	397,523	$	(1,016,712	)	$	5,723,824
Mortgage loans on real estate and construction loans held for investment at amortized cost:
Residential	$	52,892,902
Residential construction		14,016,866
Commercial		45,130,981
Less: Allowance for loan losses		(4,524,811	)
Total mortgage loans on real estate and construction loans held for investment	$	107,515,938
Real estate held for investment - net of depreciation	$	3,715,666
Other real estate owned held for investment - net of  depreciation		54,707,593
Other real estate owned held for sale		5,998,740
Total real estate	$	64,421,999
Policy and other loans at amortized cost - net of allowance for doubtful accounts	$	17,866,200
Short-term investments at amortized cost	$	5,213,346

The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2011 are summarized as follows:

 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2011:
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$	2,820,159	$	551,740	$	-		$	3,371,899
Obligations of states and political subdivisions		3,024,425		309,986		(13,156	)		3,321,255
Corporate securities including public utilities		113,648,447		10,075,071		(2,268,146	)		121,455,372
Mortgage-backed securities		6,575,178		354,286		(356,900	)		6,572,564
Redeemable preferred stock		1,510,878		72,639		(129,200	)		1,454,317
Total fixed maturity securities held to maturity	$	127,579,087	$	11,363,722	$	(2,767,402	)	$	136,175,407

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2011:
Equity securities available for sale at estimated fair value:
Non-redeemable preferred stock	$	20,281		$	-	$	(1,843	)	$	18,438
Common stock:
Industrial, miscellaneous and all other		7,250,991			363,387		(1,333,424	)		6,280,954
Total equity securities available for sale at estimated fair value	$	7,271,272		$	363,387	$	(1,335,267	)	$	6,299,392
Mortgage loans on real estate and construction loans held for investment at amortized cost:
Residential	$	54,344,327
Residential construction		17,259,666
Commercial		48,433,147
Less: Allowance for loan losses		(4,881,173	)
Total mortgage loans on real estate and construction loans held for investment	$	115,155,967
Real estate held for investment - net of depreciation	$	3,786,780
Other real estate owned held for investment - net of depreciation		46,398,095
Other real estate owned held for sale		5,793,900
Total real estate	$	55,978,775
Policy and other loans at amortized cost - net of allowance for doubtful accounts	$	18,463,277
Short-term investments at amortized cost	$	6,932,023

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at March 31, 2012 and December 31, 2011. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related fixed maturity securities:

	Unrealized Losses for Less than Twelve Months		No. of Investment Positions		Unrealized Losses for More than Twelve Months		No. of Investment Positions		Total Unrealized Loss
At March 31, 2012
Obligations of states and political subdivisions	$	-		0	$	7,608		2	$	7,608
Corporate securities including public utilities		723,849		36		457,314		12		1,181,163
Mortgage-backed securities		116,030		2		171,980		2		288,010
Redeemable preferred stock		-		0		26,800		1		26,800
Total unrealized losses	$	839,879		38	$	663,702		17	$	1,503,581
Fair Value	$	16,591,021			$	4,586,000			$	21,177,021
At December 31, 2011
Obligations of states and political subdivisions	$	-		0	$	13,156		2	$	13,156
Corporate securities including public utilities		1,544,224		47		723,922		12		2,268,146
Mortgage-backed securities		161,300		3		195,599		1		356,899
Redeemable preferred stock		800		1		128,400		1		129,200
Total unrealized losses	$	1,706,324		51	$	1,061,077		16	$	2,767,401
Fair Value	$	24,249,533			$	3,762,892			$	28,012,425

As of March 31, 2012, the average market value of the related fixed maturities was 93.4% of amortized cost and the average market value was 91.0% of amortized cost as of December 31, 2011. During the three months ended March 31, 2012 and  2011 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $45,000 and $35,129, respectively.

On a quarterly basis, the Company reviews its available-for-sale fixed investment securities related to corporate securities and other public utilities, consisting of bonds and preferred stocks that are in a loss position. The review involves an analysis of the securities in relation to historical values, and projected earnings and revenue growth rates. Based on the analysis, a determination is made whether a security will likely recover from the loss position within a reasonable period of time. If it is unlikely that the investment will recover from the loss position, the loss is considered to be other than temporary, the security is written down to the impaired value and an impairment loss is recognized. No other than temporary impairment loss was considered to exist for these fixed maturity securities as of March 31, 2012 and 2011.

Equity Securities

The following tables summarize unrealized losses on equity securities that were carried at estimated fair value based on quoted trading prices at March 31, 2012 and December 31, 2011. The unrealized losses were primarily the result of decreases in fair value due to overall equity market declines. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related equity securities available-for-sale in a loss position:

	Unrealized Losses for Less than Twelve Months		No. of Investment Positions		Unrealized Losses for More than Twelve Months		No. of Investment Positions		Total Unrealized Losses
At March 31, 2012
Non-redeemable preferred stock	$	-		0	$	900		1	$	900
Industrial, miscellaneous and all other		460,575		52		555,237		23		1,015,812
Total unrealized losses	$	460,575		52	$	556,137		24	$	1,016,712
Fair Value	$	1,990,201			$	869,074			$	2,859,275
At December 31, 2011
Non-redeemable preferred stock	$	-		-	$	1,843		2	$	1,843
Industrial, miscellaneous and all other		955,400		79		378,024		14		1,333,424
Total unrealized losses	$	955,400		79	$	379,867		16	$	1,335,267
Fair Value	$	2,857,082			$	560,529			$	3,417,611

As of March 31, 2012, the average market value of the equity securities available for sale was 73.8% of the original investment and the average market value was 71.9% of the original investment as of December 31, 2011.

The intent of the Company is to retain equity securities for a period of time sufficient to allow for the recovery in fair value. However, the Company may sell equity securities during a period in which the fair value has declined below the amount of the original investment. In certain situations new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. During the three months ended March 31, 2012 and 2011, there was no other than temporary decline in fair value.

On a quarterly basis, the Company reviews its investment in industrial, miscellaneous and all other equity securities that are in a loss position. The review involves an analysis of the securities in relation to historical values, price earnings ratios, projected earnings and revenue growth rates. Based on the analysis a determination is made whether a security will likely recover from the loss position within a reasonable period of time. If it is unlikely that the investment will recover from the loss position, the loss is considered to be other than temporary, the security is written down to the impaired value and an impairment loss is recognized. No other than temporary impairment loss was considered to exist for these equity securities as of March 31, 2012 and 2011.

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 fair values for equity securities are based on quoted market prices.

The amortized cost and estimated fair value of fixed maturity securities at March 31, 2012, by contractual maturity, are shown below. 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.

	Amortized Cost		Estimated Fair Value
Held to Maturity:
Due in 2012 through 2015	$	931,571	$	942,117
Due in 2013 through 2016		18,820,368		20,544,511
Due in 2017 through 2021		50,242,150		54,563,236
Due after 2021		52,708,373		57,629,513
Mortgage-backed securities		6,458,035		6,534,080
Redeemable preferred stock		1,510,878		1,541,550
Total held to maturity	$	130,671,375	$	141,755,007

The amortized cost and estimated fair value of available for sale securities at March 31, 2012, by contractual maturity, are shown below. 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. Equities are valued using the specific identification method.

	Amortized Cost		Estimated Fair Value
Available for Sale:
Due in 2012 through 2015	$	-	$	-
Due in 2013 through 2016		-		-
Due in 2017 through 2021		-		-
Due after 2021		-		-
Non-redeemable preferred stock		20,281		19,550
Common stock		6,322,733		5,704,274
Total available for sale	$	6,343,014	$	5,723,824

The Company’s realized gains and losses, other than temporary impairments from investments and other assets, are summarized as follows:

	Three Months Ended March 31,
	2012			2011
Fixed maturity securities held to maturity:
Gross realized gains	$	7,604		$	153,491
Gross realized losses		(334	)		(38,085	)
Other than temporary impairments		(45,000	)		(35,129	)
Securities available for sale:
Gross realized gains		137,208			288,251
Gross realized losses		(5,705	)		(6,853	)
Other than temporary impairments		-			-
Other assets:
Gross realized gains		32,286			9,156
Gross realized losses		-			(60,870	)
Other than temporary impairments		-			-
Total	$	126,060		$	309,961

The net carrying amount of held to maturity securities sold was $341,173 and $12,341,156 for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively.  The net realized gain related to these sales was $7,242 and $462,267 for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively. Certain circumstances lead to these decisions to sell. In 2012 and 2011, the Company sold certain held to maturity bonds in gain positions to reduce its risk in certain industries or companies.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on available-for-sale securities) at March 31, 2012, other than investments issued or guaranteed by the United States Government.

Major categories of net investment income are as follows:

	Three Months Ended March 31,
	2012			2011
Fixed maturity securities	$	1,910,344		$	1,752,777
Equity securities		63,578			67,986
Mortgage loans on real estate		2,136,577			1,287,213
Real estate		658,456			571,312
Policy and other loans		228,327			213,118
Short-term investments,  principally gains on sale of mortgage loans and other		2,041,280			1,374,332
Gross investment income		7,038,562			5,266,738
Investment expenses		(984,515	)		(996,290	)
Net investment income	$	6,054,047		$	4,270,448

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $82,752 and $84,149 for three months ended March 31, 2012 and 2011, respectively.

Net investment income on real estate consists primarily of rental revenue received under short-term leases.

Investment expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative expenses relating to investment activities.

Securities on deposit for regulatory authorities as required by law amounted to $9,603,781 at March 31, 2012 and $9,593,318 at December 31, 2011. The restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

Mortgage Loans

Mortgage loans consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0 % to 10.5% per annum, maturity dates range from three months to 30 years and 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 its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors live or do business. At March 31, 2012, the Company had 35%, 11% and 11% of its mortgage loans from borrowers located in the states of Utah, California and Florida, respectively. The mortgage loans on real estate balances on the consolidated balance sheet are reflected net of an allowance for loan losses of $4,524,811 and $4,881,173 at March 31, 2012 and December 31, 2011, respectively.

The Company establishes a valuation allowance for credit losses in its portfolio.

The following is a summary of the allowance for loan losses as a contra-asset account for the periods presented:

Allowance for Credit Losses and Recorded Investment in Mortgage Loans
	Commercial		Residential			Residential Construction			Total
March 31, 2012
Allowance for credit losses:
Beginning balance - January 1, 2011	$	-	$	4,338,805		$	542,368		$	4,881,173
Charge-offs		-		(137,912	)		(250,524	)		(388,436	)
Provision		-		32,074			-			32,074
Ending balance -March 31, 2012	$	-	$	4,232,967		$	291,844		$	4,524,811
Ending balance: individually evaluated for impairment	$	-	$	711,369		$	-		$	711,369
Ending balance: collectively evaluated for impairment	$	-	$	3,521,598		$	291,844		$	3,813,442
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-		$	-		$	-
Mortgage loans:
Ending balance	$	45,130,981	$	52,892,902		$	14,016,866		$	112,040,749
Ending balance: individually evaluated for impairment	$	2,108,271	$	5,153,359		$	2,663,415		$	9,925,045
Ending balance: collectively evaluated for impairment	$	43,022,710	$	47,739,543		$	11,353,451		$	102,115,704
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-		$	-		$	-
December 31, 2011
Allowance for credit losses:
Beginning balance - January 1, 2011	$	-	$	6,212,072		$	858,370		$	7,070,442
Charge-offs		-		(2,994,715	)		(430,274	)		(3,424,989	)
Provision		-		1,121,448			114,272			1,235,720
Ending balance - December 31, 2011	$	-	$	4,338,805		$	542,368		$	4,881,173
Ending balance: individually evaluated for impairment	$	-	$	738,975		$	250,524		$	989,499
Ending balance: collectively evaluated for impairment	$	-	$	3,599,830		$	291,844		$	3,891,674
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-		$	-		$	-
Mortgage loans:
Ending balance	$	48,433,147	$	54,344,327		$	17,259,666		$	120,037,140
Ending balance: individually evaluated for impairment	$	2,758,235	$	4,611,995		$	5,645,865		$	13,016,095
Ending balance: collectively evaluated for impairment	$	45,674,912	$	49,732,332		$	11,613,801		$	107,021,045
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-		$	-		$	-

The following is a summary of the aging of mortgage loans for the periods presented:

Age Analysis of Past Due Mortgage Loans
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days 1)		In Foreclosure 1)		Total Past Due		Current		Total Mortgage Loans		Allowance for Loan Losses			Net Mortgage Loans
March 31, 2012
Commercial	$	-	$	-	$	-	$	2,108,271	$	2,108,271	$	43,022,710	$	45,130,981	$	-		$	45,130,981
Residential		790,088		1,630,155		5,524,043		5,153,359		13,097,645		39,795,257		52,892,902		(4,232,967	)		48,659,935
Residential   Construction		287,110		1,284,622		1,142,422		2,663,415		5,377,569		8,639,297		14,016,866		(291,844	)		13,725,022
Total	$	1,077,198	$	2,914,777	$	6,666,465	$	9,925,045	$	20,583,485	$	91,457,264	$	112,040,749	$	(4,524,811	)	$	107,515,938
December 31, 2011
Commercial	$	-	$	-	$	1,053,500	$	2,758,235	$	3,811,735	$	44,621,412	$	48,433,147	$	-		$	48,433,147
Residential		2,478,084		2,058,261		5,500,340		4,611,995		14,648,680		39,695,647		54,344,327		(4,338,805	)		50,005,522
Residential   Construction		859,651		682,532		309,651		5,645,865		7,497,699		9,761,967		17,259,666		(542,368	)		16,717,298
Total	$	3,337,735	$	2,740,793	$	6,863,491	$	13,016,095	$	25,958,114	$	94,079,026	$	120,037,140	$	(4,881,173	)	$	115,155,967
1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

Impaired Mortgage Loans

Impaired mortgage loans include loans with a related specific valuation allowance or loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary. The recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, for each reporting period and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:

Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2012
With no related allowance recorded:
Commercial	$	2,108,271	$	2,108,271	$	-	$	2,108,271	$	-
Residential		5,524,043		5,524,043		-		5,524,043		-
Residential construction		3,805,837		3,805,837		-		3,805,837		-
With an allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-
Residential		5,153,359		5,153,359		711,369		5,153,359		-
Residential construction		-		-		-		-		-
Total:
Commercial	$	2,108,271	$	2,108,271	$	-	$	2,108,271	$	-
Residential		10,677,402		10,677,402		711,369		10,677,402		-
Residential construction		3,805,837		3,805,837		-		3,805,837		-
December 31, 2011
With no related allowance recorded:
Commercial	$	3,811,735	$	3,811,735	$	-	$	3,811,735	$	-
Residential		5,500,340		5,500,340		-		5,500,340		-
Residential construction		309,651		309,651		-		309,651		-
With an allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-
Residential		4,611,995		4,611,995		738,975		4,611,995		-
Residential construction		5,645,865		5,645,865		250,524		5,645,865		-
Total:
Commercial	$	3,811,735	$	3,811,735	$	-	$	3,811,735	$	-
Residential		10,112,335		10,112,335		738,975		10,112,335		-
Residential construction		5,955,516		5,955,516		250,524		5,955,516		-

Credit Risk Profile Based on Performance Status

The Company’s mortgage loan portfolio is monitored based on performance of the loans. Monitoring a mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The Company defines non-performing mortgage loans as loans 90 days past due or on non-accrual status.

The Company’s performing and non-performing mortgage loans were as follows:

Mortgage Loan Credit Exposure
Credit Risk Profile Based on Payment Activity
	Commercial				Residential				Residential Construction				Total
	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Performing	$	43,022,710	$	44,621,412	$	42,215,500	$	44,231,992	$	10,211,029	$	11,304,150	$	95,449,239	$	100,157,554
Nonperforming		2,108,271		3,811,735		10,677,402		10,112,335		3,805,837		5,955,516		16,591,510		19,879,586
Total	$	45,130,981	$	48,433,147	$	52,892,902	$	54,344,327	$	14,016,866	$	17,259,666	$	112,040,749	$	120,037,140

Non-Accrual Mortgage Loans

Once a loan is past due 90 days, it is the Company’s policy to end the accrual of interest income on the loan and write off any income that had been accrued. Interest not accrued on these loans totals $1,905,000 and $2,308,000 as of March 31, 2012 and December 31, 2011, respectively.

The following is a summary of mortgage loans on a nonaccrual status for the periods presented.

	Mortgage Loans on Nonaccrual Status
	As of March 31,		As of December 31,
	2012		2011
Commercial	$	2,108,271	$	3,811,735
Residential		10,677,402		10,112,335
Residential construction		3,805,837		5,955,516
Total	$	16,591,510	$	19,879,586

Loan Loss Reserve

When a repurchase demand sold to investors is received from a third party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated. The key factors that are used in the estimated 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.

The following is a summary of the loan loss reserve that is included in other liabilities and accrued expenses:

	As of March 31,		As of December 31,
	2012		2011
Balance, beginning of period	$	2,337,875	$	5,899,025
Provisions for losses		445,275		1,667,805
Charge-offs		119,738		(5,228,955	)
Balance	$	2,902,888	$	2,337,875

The Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date. The loan loss reserve may not be adequate, however, for claims asserted by third party investors. Actual loan loss experience could change, in the near-term, from the established reserve based upon claims asserted by third party investors. If SecurityNational Mortgage is unable to negotiate acceptable terms with the third party investors, legal action may ensue in an effort to obtain amounts that the third party investors claim are allegedly due.  In the event of legal action, if SecurityNational Mortgage is not successful in its defenses against claims asserted by these third party investors to the extent that a substantial judgment is entered against SecurityNational Mortgage which is beyond its capacity to pay, SecurityNational Mortgage may be required to curtail or cease operations.