3) Investments

9 Months Ended

Sep. 30, 2016

Notes

3) Investments

3)      Investments

The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of September 30, 2016 are summarized as follows:

	Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
September 30, 2016
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$         4,472,581	$          375,865	$           (8,548)	$         4,839,898
Obligations of states and political subdivisions	6,779,383	199,454	(41,571)	6,937,266
Corporate securities including public utilities	162,331,688	15,612,140	(2,572,792)	175,371,036
Mortgage-backed securities	11,472,643	416,243	(116,859)	11,772,027
Redeemable preferred stock	623,635	52,552	-	676,187
Total fixed maturity securities held to maturity	$     185,679,930	$     16,656,254	$    (2,739,770)	$     199,596,415

Equity securities available for sale at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$       10,940,465	$          341,488	$    (1,136,558)	$       10,145,395
Total equity securities available for sale at estimated fair value	$       10,940,465	$          341,488	$    (1,136,558)	$       10,145,395
Mortgage loans on real estate and construction loans held for investment at amortized cost:
Residential	$       50,346,379
Residential construction	42,011,069
Commercial	39,747,671
Less: Allowance for loan losses	(2,231,362)
Total mortgage loans on real estate and construction loans held for investment	$     129,873,757
Real estate held for investment - net of depreciation	$     131,881,535
Policy loans and other investments are shown at amortized cost except for other investments that are shown at estimated fair value:
Policy loans	$         6,858,019
Insurance assignments	32,400,740
Promissory notes	48,797
Other investments at estimated fair value	1,780,389
Less: Allowance for doubtful accounts	(1,106,374)
Total policy loans and other investments	$       39,981,571
Short-term investments at amortized cost	$       28,467,741

The Company’s investments in fixed maturity securities held to maturity and equity securities available for sale as of December 31, 2015 are summarized as follows:

	Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
December 31, 2015:
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$         3,560,579	$          292,869	$           (4,743)	$         3,848,705
Obligations of states and political subdivisions	1,805,828	182,073	(1,040)	1,986,861
Corporate securities including public utilities	134,488,108	9,836,355	(5,501,743)	138,822,720
Mortgage-backed securities	5,091,887	190,867	(75,580)	5,207,174
Redeemable preferred stock	612,023	29,675	-	641,698
Total fixed maturity securities held to maturity	$     145,558,425	$     10,531,839	$    (5,583,106)	$     150,507,158

Equity securities available for sale at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$         9,891,500	$          213,683	$    (1,674,093)	$         8,431,090
Total securities available for sale carried at estimated fair value	$         9,891,500	$          213,683	$    (1,674,093)	$         8,431,090
Mortgage loans on real estate and construction loans held for investment at amortized cost:
Residential	$       46,020,490
Residential construction	34,851,557
Commercial	33,522,978
Less: Allowance for loan losses	(1,848,120)
Total mortgage loans on real estate and construction loans held for investment	$     112,546,905
Real estate held for investment - net of depreciation	$     114,852,432
Policy loans and other investments are shown at amortized cost except for other investments that are shown at estimated fair value:
Policy loans	$         6,896,457
Insurance assignments	32,369,014
Promissory notes	48,797
Other investments at estimated fair value	1,174,769
Less: Allowance for doubtful accounts	(906,616)
Total policy loans and other investments	$       39,582,421
Short-term investments at amortized cost	$       16,915,808

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities, which are carried at amortized cost, at September 30, 2016 and December 31, 2015. 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 September 30, 2016
U.S. Treasury Securities and Obligations of U.S. Government Agencies	$            8,548	2	$                      -	0	$            8,548
Obligations of states and political subdivisions	44,269	19	-	0	44,269
Corporate securities including public utilities	278,815	41	2,293,977	36	2,572,792
Mortgage-backed securities	93,184	37	20,977	1	114,161
Total unrealized losses	$        424,816	99	$       2,314,954	37	$     2,739,770
Fair Value	$   25,434,664		$     11,731,253		$   37,165,917
At December 31, 2015
U.S. Treasury Securities and Obligations of U.S. Government Agencies	$            4,743	2	$                      -	0	$            4,743
Obligations of states and political subdivisions	-	0	1,040	1	1,040
Corporate securities including public utilities	3,701,572	98	1,800,171	18	5,501,743
Mortgage-backed securities	75,580	4	-	0	75,580
Total unrealized losses	$     3,781,895	104	$       1,801,211	19	$     5,583,106
Fair Value	$   34,076,401		$       3,809,957		$   37,886,358

The average market value of the related fixed maturities was 93.3% and 87.2% of amortized cost as of September 30, 2016 and December 31, 2015, respectively. During the three months ended September 30, 2016 and 2015 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $30,000 for each reporting period, and for the nine months ended September 30, 2016 and 2015 an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $90,000 for each reporting period.

On a quarterly basis, the Company reviews its available for sale and held to maturity 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.

Equity Securities

The following tables summarize unrealized losses on equity securities that were carried at estimated fair value based on quoted trading prices at September 30, 2016 and December 31, 2015. 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 September 30, 2016
Industrial, miscellaneous and all other	$      327,241	126	$      809,317	109	$   1,136,558
Total unrealized losses	$      327,241	126	$      809,317	109	$   1,136,558
Fair Value	$   2,090,748		$   2,040,729		$   4,131,477
At December 31, 2015
Industrial, miscellaneous and all other	$      997,862	222	$      676,232	74	$   1,674,093
Total unrealized losses	$      997,862	222	$      676,232	74	$   1,674,093
Fair Value	$   4,177,709		$      760,860		$   4,938,569

The average market value of the equity securities available for sale was 78.4% and 74.7% of the original investment as of September 30, 2016 and December 31, 2015, respectively. 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 September 30, 2016 and 2015, an other than temporary decline in the fair value resulted in the recognition of an impairment loss on equity securities of $-0- and $26,290, respectively, and for the nine months ended September 30, 2016 and 2015, an other than temporary decline in the fair value resulted in the recognition of an impairment loss on equity securities of $43,630 and $77,497, respectively.

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.

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 September 30, 2016, 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 2016	$         1,200,208	$         1,202,710
Due in 2017 through 2020	41,412,637	43,902,597
Due in 2021 through 2025	38,495,506	41,406,480
Due after 2025	92,475,301	100,636,414
Mortgage-backed securities	11,472,643	11,772,027
Redeemable preferred stock	623,635	676,187
Total held to maturity	$     185,679,930	$     199,596,415

The cost and estimated fair value of available for sale securities at September 30, 2016, 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.

	Cost	Estimated Fair Value
Available for Sale:
Common stock	$     10,940,465	$      10,145,395
Total available for sale	$     10,940,465	$      10,145,395

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

	Three Months Ended Sept 30		Nine Months Ended Sept 30
	2016	2015	2016	2015
Fixed maturity securities held to maturity:
Gross realized gains	$        65,179	$        15,279	$      259,635	$      374,337
Gross realized losses	(4,527)	(22,796)	(7,405)	(82,166)
Other than temporary impairments	(30,000)	(30,000)	(90,000)	(90,000)
Securities available for sale:
Gross realized gains	36,751	35,009	176,331	165,018
Gross realized losses	(4,544)	(2,521)	(37,146)	(3,536)
Other than temporary impairments	-	(26,290)	(43,630)	(77,497)
Other assets:
Gross realized gains	191,992	1,731,939	468,675	2,187,271
Gross realized losses	(324,020)	(404,132)	(680,794)	(367,306)
Total	$       (69,169)	$    1,296,488	$        45,666	$    2,106,121

The net carrying amount of held to maturity securities sold was $1,989,159 and $2,543,312 for the nine months ended September 30, 2016 and 2015, respectively.  The net realized gain related to these sales was $156,154 and $330,373 for the nine months ended September 30, 2016 and 2015, respectively.

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 September 30, 2016, other than investments issued or guaranteed by the United States Government.

Major categories of net investment income are as follows:

	Three Months Ended Sept 30		Nine Months Ended Sept 30
	2016	2015	2016	2015
Fixed maturity securities	$     2,410,641	$     2,014,014	$     6,472,847	$     6,139,698
Equity securities	78,402	61,238	208,696	175,954
Mortgage loans on real estate	2,257,396	1,754,852	6,563,902	5,396,016
Real estate	2,736,301	2,320,242	8,162,574	6,674,594
Policy loans	205,537	219,916	558,778	597,101
Insurance assignments	2,952,170	2,540,028	8,915,654	7,736,439
Other investments	-	-	13,962	-
Short-term investments,  principally interest on sale of mortgage loans and other	2,237,230	2,237,376	6,117,210	6,005,357
Gross investment income	12,877,677	11,147,666	37,013,623	32,725,159
Investment expenses	(3,145,025)	(2,715,252)	(9,152,960)	(7,879,228)
Net investment income	$     9,732,652	$     8,432,414	$   27,860,663	$   24,845,931

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $113,289 and $119,963 for the three months ended September 30, 2016 and 2015, respectively, and $295,630 and $306,449 for the nine months ended September 30, 2016 and 2015, 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.

Securities on deposit for regulatory authorities as required by law amounted to $9,370,867 at September 30, 2016 and $8,815,542 at December 31, 2015. The restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

Real Estate

The Company continues to strategically deploy resources into real estate 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 foreclosures on delinquent mortgage loans.

Commercial Real Estate Held for Investment

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 reports. Geographic locations and asset classes of the investment activity is 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 when the geographic boundary does not warrant full-time staff or through strategic lease-up periods. The Company generally looks to acquire assets in regions that are high growth regions for employment and population and in assets that provide operational efficiencies.

The Company currently owns and operates 14 commercial properties in 8 states. These properties include industrial warehouses, office buildings, and retail centers and includes the redevelopment and expansion of its corporate campus at 53^rd South which broke ground in December 2015 with a net ending balance of $15,913,913. The assets are primarily held without debt; however, the Company does use debt in strategic cases to leverage established yields or to acquire higher quality, or class, of asset.

The following is a summary of the Company’s investment in commercial real estate for the periods presented:

	Net Ending Balance				Total Square Footage
	September 30		December 31		September 30	December 31
	2016		2015		2016	2015
Arizona	$      453,847	(1)	$      463,774	(1)	16,270	16,270
Arkansas	101,422		-		3,200	-
Kansas	12,835,094		11,537,335		222,679	222,679
Louisiana	523,193		-		7,063
Mississippi	3,842,630		-		33,821	-
New Mexico	7,000	(1)	7,000	(1)	-	-
Texas	3,745,003		3,768,542		23,470	23,470
Utah	33,340,242		17,403,746		433,244	253,244
	$ 54,848,431		$ 33,180,397		739,747	515,663
(1) Includes undeveloped land

Residential Real Estate Held for Investment

The Company owns a portfolio of residential homes primarily as a result of loan foreclosures.  The strategy has been to lease these homes to produce cash flow, and allow time for the economic fundamentals to return to the various markets. As an orderly and active market for these homes returns, the Company has the option to dispose or to continue and hold them for cash flow and acceptable returns.

The Company established Security National Real Estate Services (“SNRE”) in 2013 to manage the residential portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across the country.

As of September 30, 2016, SNRE manages 132 residential properties in 8 states across the United States which includes a newly constructed apartment complex, Dry Creek at East Village, in Sandy, Utah with a net ending balance of $36,082,825.

The following is a summary of the Company’s investment in residential real estate for the periods presented:

	Net Ending Balance
	September 30	December 31
	2016	2015
Arizona	$       745,663	$     944,614
California	6,131,083	6,158,253
Colorado	367,144	553,230
Florida	8,361,768	9,203,624
Illinois	-	165,800
Oklahoma	-	99,862
Ohio	46,658	-
Oregon	-	120,000
South Carolina	-	823,872
Texas	1,179,261	1,198,860
Utah	59,915,346	62,117,738
Washington	286,181	286,182
	$   77,033,104	$ 81,672,035

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.  Currently, the Company occupies nearly 80,000 square feet, or 10% of the overall commercial real estate holdings.

As of September 30, 2016, real estate owned and occupied by the company is summarized as follows:

Mortgage Loans

Mortgage loans consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, 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 do business.At September 30, 2016, the Company had 48%, 14%, 9%, 8%, and 5% of its mortgage loans from borrowers located in the states of Utah, California, Texas, Florida, and Oregon, respectively. The mortgage loans on real estate balances on the consolidated balance sheet are reflected net of an allowance for loan losses of $2,231,362 and $1,848,120 at September 30, 2016 and December 31, 2015, 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
September 30, 2016
Allowance for credit losses:
Beginning balance - January 1, 2016	$        187,129	$     1,560,877	$        100,114	$     1,848,120
Charge-offs	-	(210,890)	-	(210,890)
Provision	-	594,132	-	594,132
Ending balance -September 30, 2016	$        187,129	$     1,944,119	$        100,114	$     2,231,362
Ending balance: individually evaluated for impairment	$                    -	$        437,338	$                    -	$        437,338
Ending balance: collectively evaluated for impairment	$        187,129	$     1,506,781	$        100,114	$     1,794,024
Ending balance: loans acquired with deteriorated credit quality	$                    -	$                    -	$                    -	$                    -
Mortgage loans:
Ending balance	$   39,747,671	$   50,346,379	$   42,011,069	$ 132,105,119
Ending balance: individually evaluated for impairment	$        202,721	$     2,911,050	$        403,000	$     3,516,771
Ending balance: collectively evaluated for impairment	$   39,544,950	$   47,435,329	$   41,608,069	$ 128,588,348
Ending balance: loans acquired with deteriorated credit quality	$                    -	$                    -	$                    -	$                    -
December 31, 2015
Allowance for credit losses:
Beginning balance - January 1, 2015	$        187,129	$     1,715,812	$        100,114	$     2,003,055
Charge-offs	-	(123,942)	-	(123,942)
Provision	-	(30,993)	-	(30,993)
Ending balance - December 31, 2015	$        187,129	$     1,560,877	$        100,114	$     1,848,120
Ending balance: individually evaluated for impairment	$                    -	$        305,962	$                    -	$        305,962
Ending balance: collectively evaluated for impairment	$        187,129	$     1,254,915	$        100,114	$     1,542,158
Ending balance: loans acquired with deteriorated credit quality	$                    -	$                    -	$                    -	$                    -
Mortgage loans:
Ending balance	$   33,522,978	$   46,020,490	$   34,851,557	$ 114,395,025
Ending balance: individually evaluated for impairment	$                    -	$     3,087,161	$          93,269	$     3,180,430
Ending balance: collectively evaluated for impairment	$   33,522,978	$   42,933,329	$   34,758,287	$ 111,214,594
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
September 30, 2016
Commercial	$                       -	$                       -	$                        -	$             202,721	$            202,721	$    39,544,950	$       39,747,671	$           (187,129)	$      39,560,542
Residential	1,232,358	292,573	1,440,292	2,911,050	5,876,273	44,470,106	50,346,379	(1,944,119)	48,402,260
Residential   Construction	-	74,714	64,895	403,000	542,609	41,468,460	42,011,069	(100,114)	41,910,955
Total	$      1,232,358	$         367,287	$        1,505,187	$          3,516,771	$         6,621,603	$    125,483,516	$        132,105,119	$      (2,231,362)	$    129,873,757
December 31, 2015
Commercial	$                       -	$                       -	$                        -	$                          -	$                          -	$    33,522,978	$      33,522,978	$           (187,129)	$      33,335,849
Residential	1,162,102	884,143	2,212,993	3,087,161	7,346,399	38,674,091	46,020,490	(1,560,877)	44,459,613
Residential   Construction	-	-	64,895	93,269	158,164	34,693,393	34,851,557	(100,114)	34,751,443
Total	$        1,162,102	$          884,143	$      2,277,888	$         3,180,430	$        7,504,563	$   106,890,462	$      114,395,025	$       (1,848,120)	$     112,546,905
(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
September 30, 2016
With no related allowance recorded:
Commercial	$       202,721	$       202,721	$                  -	$       202,721	$                   -
Residential	-	-	-	-	-
Residential construction	403,000	403,000	-	403,000	-
With an allowance recorded:
Commercial	$                  -	$                   -	$                  -	$                  -	$                   -
Residential	2,911,050	2,911,050	437,338	2,911,050	-
Residential construction	-	-	-	-	-
Total:
Commercial	$       202,721	$       202,721	$                  -	$       202,721	$                   -
Residential	2,911,050	2,911,050	437,338	2,911,050	-
Residential construction	403,000	403,000	-	403,000	-
December 31, 2015
With no related allowance recorded:
Commercial	$                  -	$                   -	$                  -	$                  -	$                   -
Residential	-	-	-	-	-
Residential construction	93,269	93,269	-	93,269	-
With an allowance recorded:
Commercial	$                  -	$                   -	$                  -	$                  -	$                   -
Residential	3,087,161	3,087,161	305,962	3,087,161	-
Residential construction	-	-	-	-	-
Total:
Commercial	$                  -	$                   -	$                  -	$                  -	$                   -
Residential	3,087,161	3,087,161	305,962	3,087,161	-
Residential construction	93,269	93,269	-	93,269	-

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 or greater delinquent 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
	September 30, 2016	December 31, 2015	September 30, 2016	December 31, 2015	September 30, 2016	December 31, 2015	September 30, 2016	December 31, 2015
Performing	$ 39,544,950	$  33,522,978	$  45,995,036	$  40,720,336	$    41,543,174	$  34,693,393	$   127,083,160	$ 108,936,707
Nonperforming	202,721	-	4,351,343	5,300,154	467,895	158,164	5,021,959	5,458,318
Total	$  39,747,671	$  33,522,978	$  50,346,379	$  46,020,490	$    42,011,069	$   34,851,557	$     132,105,119	$  114,395,025

Non-Accrual Mortgage Loans

Once a loan is past due 90 days, it is the policy of the Company 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 $188,000 and $268,000 as of September 30, 2016 and December 31, 2015, respectively.

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

	Mortgage Loans on Nonaccrual Status
	As of September 30 2016	As of December 31 2015
Commercial	$                       202,721	$                                  -
Residential	4,351,343	5,300,154
Residential construction	467,895	158,164
Total	$                    5,021,959	$                   5,458,318

Loan Loss Reserve

When a repurchase demand 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 September 30 2016	As of December 31 2015
Balance, beginning of period	$                2,805,900	$               1,718,150
Provisions for losses	2,853,690	6,295,043
Charge-offs	(333,288)	(5,207,293)
Balance, end of period	$                5,326,302	$               2,805,900

The Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date. Actual loan loss experience could change, in the near-term, from the established reserve based upon claims that could be asserted by third party investors. SecurityNational Mortgage believes there is potential to resolve any alleged claims by third party investors on acceptable terms. If SecurityNational Mortgage is unable to resolve such claims on acceptable terms, legal action may ensue. In the event of legal action by any third party investor, SecurityNational Mortgage believes it has significant defenses to any such action and intends to vigorously defend itself against such action.