Investments

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Investments

3) Investments

The Company’s investments as of June 30, 2022 are summarized as follows:

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
June 30, 2022:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	$	51,273,582		$	61,437	$	(1,160,899	)	$	50,174,120
Obligations of states and political subdivisions		6,051,648			69,721		(163,527	)		5,957,842
Corporate securities including public utilities		187,219,967			3,656,829		(6,622,423	)		184,254,373
Mortgage-backed securities		31,598,530			191,301		(1,772,065	)		30,017,766
Redeemable preferred stock		261,142			11,039		-			272,181
Total fixed maturity securities available for sale	$	276,404,869		$	3,990,327	$	(9,718,914	)	$	270,676,282
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$	9,730,028		$	2,309,512	$	(841,137	)	$	11,198,403
Total equity securities at estimated fair value	$	9,730,028		$	2,309,512	$	(841,137	)	$	11,198,403
Mortgage loans held for investment at amortized cost:
Residential	$	40,355,630
Residential construction		203,130,224
Commercial		34,050,215
Less: Unamortized deferred loan fees, net		(1,015,336	)
Less: Allowance for loan losses		(1,476,895	)
Less: Net discounts		(352,212	)
Total mortgage loans held for investment	$	274,691,626
Real estate held for investment - net of accumulated depreciation:
Residential	$	38,486,971
Commercial		158,068,734
Total real estate held for investment	$	196,555,705
Real estate held for sale:
Residential	$	200,962
Commercial		2,540,698
Total real estate held for sale	$	2,741,660
Other investments and policy loans at amortized cost:
Policy loans	$	13,130,188
Insurance assignments		43,314,500
Federal Home Loan Bank stock (1)		2,588,400
Other investments		9,177,176
Less: Allowance for doubtful accounts		(1,800,076	)
Total policy loans and other investments	$	66,410,188
Accrued investment income	$	8,240,805
Total investments	$	830,514,669

(1) Includes $937,600 of Membership stock and $1,650,800 of Activity stock due to short-term borrowings and letters of credit.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The Company’s investments as of December 31, 2021 are summarized as follows:

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2021:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	$	22,307,736		$	578,567	$	-		$	22,886,303
Obligations of states and political subdivisions		4,649,917			212,803		(1,989	)		4,860,731
Corporate securities including public utilities		174,711,061			21,791,370		(353,668	)		196,148,763
Mortgage-backed securities		34,365,382			905,159		(161,332	)		35,109,209
Redeemable preferred stock		269,214			13,383		-			282,597
Total fixed maturity securities available for sale	$	236,303,310		$	23,501,282	$	(516,989	)	$	259,287,603
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$	8,275,772		$	3,626,444	$	(305,802	)	$	11,596,414
Total equity securities at estimated fair value	$	8,275,772		$	3,626,444	$	(305,802	)	$	11,596,414
Mortgage loans held for investment at amortized cost:
Residential	$	53,533,712
Residential construction		175,117,783
Commercial		51,683,022
Less: Unamortized deferred loan fees, net		(918,586	)
Less: Allowance for loan losses		(1,699,902	)
Less: Net discounts		(409,983	)
Total mortgage loans held for investment	$	277,306,046
Real estate held for investment - net of accumulated depreciation:
Residential	$	41,972,462
Commercial		155,393,335
Total real estate held for investment	$	197,365,797
Real estate held for sale:
Residential	$	1,190,602
Commercial		2,540,698
Total real estate held for sale	$	3,731,300
Other investments and policy loans at amortized cost:
Policy loans	$	13,478,214
Insurance assignments		48,632,808
Federal Home Loan Bank stock (1)		2,547,100
Other investments		4,983,251
Less: Allowance for doubtful accounts		(1,686,218	)
Total policy loans and other investments	$	67,955,155
Accrued investment income	$	6,313,012
Total investments	$	823,555,327

(1) Includes $905,700 of Membership stock and $1,641,400 of Activity stock due to short-term advances and letters of credit.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

Fixed Maturity Securities

The following table summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value at June 30, 2022 and at December 31, 2021. The unrealized losses were primarily related to interest rate fluctuations and uncertainties relating to COVID-19. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

	Unrealized Losses for Less than Twelve Months		Fair Value		Unrealized Losses for More than Twelve Months		Fair Value		Combined Unrealized Loss		Combined Fair Value
At June 30, 2022
U.S. Treasury Securities And Obligations of U.S. Government Agencies	$	1,160,899	$	48,902,750	$	-	$	-	$	1,160,899	$	48,902,750
Obligations of States and Political Subdivisions		163,527		3,492,894		-		-		163,527		3,492,894
Corporate Securities		5,750,763		109,748,965		871,660		3,502,210		6,622,423		113,251,175
Mortgage and other asset-backed securities		1,533,826		23,709,933		238,239		1,576,104		1,772,065		25,286,037
Totals	$	8,609,015	$	185,854,542	$	1,109,899	$	5,078,314	$	9,718,914	$	190,932,856
At December 31, 2021
Obligations of States and Political Subdivisions	$	1,989	$	548,715	$	-	$	-	$	1,989	$	548,715
Corporate Securities		73,507		4,638,750		280,161		3,771,813		353,668		8,410,563
Mortgage and other asset-backed securities		72,952		7,934,760		88,380		1,582,804		161,332		9,517,564
Totals	$	148,448	$	13,122,225	$	368,541	$	5,354,617	$	516,989	$	18,476,842

There were 508 securities with fair value of 95.2% of aggregate amortized cost at June 30, 2022. There were 55 securities with fair value of 97.3% of aggregate amortized cost at December 31, 2021. No additional credit losses have been recognized for the three and six months ended June 30, 2022 and 2021, since the increase in unrealized losses is primarily a result of the recent rise in interest rates.

On a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale. This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”). Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for impairment, unless current market or recent company news could lead to a credit downgrade. Securities with ratings of 3 to 5 are evaluated for impairment. Securities with a rating of 6 are automatically determined to be impaired and are written down. The evaluation involves an analysis of the securities in relation to historical values, interest payment history, projected earnings and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating. Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely make interest and principal payments in accordance with the terms of the financial instrument. If it is unlikely that the security will meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated market 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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The following table presents a rollforward of the Company’s cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale.

	2022			2021
Balance of credit-related OTTI at January 1	$	264,977		$	370,975
Additions for credit impairments recognized on:
Securities not previously impaired		-			-
Securities previously impaired		-			-
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period (realized)		(39,502	)		-
Securities due to an increase in expected cash flows		-			-
Balance of credit-related OTTI at June 30	$	225,475		$	370,975

The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2022, by contractual maturity. 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
Due in 1 year	$	12,212,759	$	12,193,769
Due in 2-5 years		96,106,175		94,530,894
Due in 5-10 years		59,527,119		58,074,435
Due in more than 10 years		76,699,144		75,587,237
Mortgage-backed securities		31,598,530		30,017,766
Redeemable preferred stock		261,142		272,181
Total	$	276,404,869	$	270,676,282

The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company had pledged a total of $56,103,252, at estimated fair value, of fixed maturity securities with the FHLB at June 30, 2022. These securities are used as collateral on any cash borrowings from the FHLB. As of June 30, 2022, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was $51,524,955.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

Investment Related Earnings

The following table presents the net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments from investments and other assets.

	Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021
Fixed maturity securities:
Gross realized gains	$	129,512		$	188,266		$	175,635		$	273,659
Gross realized losses		(9,828	)		(2,119	)		(10,758	)		(14,886	)
Equity securities:
Gains on securities sold		81,596			146,011			71,317			252,580
Unrealized gains and (losses) on securities held at the end of the period		(2,106,375	)		490,394			(2,713,422	)		1,442,424
Other assets:
Gross realized gains		994,522			737,443			1,833,030			1,846,801
Gross realized losses		(3,822	)		(82,791	)		(98,222	)		(363,261	)
Total	$	(914,395	)	$	1,477,204		$	(742,420	)	$	3,437,317

The net realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined using the specific identification method.

Information regarding sales of fixed maturity securities available for sale is presented as follows.

	Three Months Ended June 30					Six Months Ended June 30
	2022			2021		2022			2021
Proceeds from sales	$	233,000		$	1,163,366	$	688,651		$	1,982,931
Gross realized gains		-			149,338		2,354			209,132
Gross realized losses		(7,825	)		-		(7,845	)		-

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

Major categories of net investment income were as follows:

	Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021
Fixed maturity securities available for sale	$	2,811,650		$	2,698,011		$	5,447,866		$	5,522,122
Equity securities		119,798			106,041			242,834			234,270
Mortgage loans held for investment		9,244,464			6,902,466			17,204,642			12,986,883
Real estate held for investment and sale		4,012,192			3,002,650			7,052,226			6,045,479
Policy loans		207,301			232,135			513,583			464,488
Insurance assignments		4,093,723			4,171,318			9,490,710			9,517,047
Other investments		98,361			39,299			169,006			53,006
Cash and cash equivalents		108,431			34,030			183,732			73,624
Gross investment income		20,695,920			17,185,950			40,304,599			34,896,919
Investment expenses		(4,724,632	)		(3,008,632	)		(9,139,005	)		(6,425,714	)
Net investment income	$	15,971,288		$	14,177,318		$	31,165,594		$	28,471,205

Net investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $730,534 and $190,668 for the three months ended June 30, 2022 and 2021, respectively, and of $1,207,243 and $351,879 for the six months ended June 30, 2022 and 2021, 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 with regulatory authorities as required by law amounted to $10,114,458 at June 30, 2022 and $10,168,853 at December 31, 2021 (the December 31, 2021 amount has been corrected from that previously reported due to a typographical error). These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) at June 30, 2022, other than investments issued or guaranteed by the United States Government.

Real Estate Held for Investment and Held for Sale

The Company strategically deploys 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 mortgage foreclosures.

Commercial Real Estate Held for Investment and Held for Sale

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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The Company currently owns and operates 11 commercial properties in 5 states. These properties include office buildings, flex office space, and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

The aggregated net ending balance of commercial real estate that serves as collateral for bank loans was $134,069,866 and $134,251,205 as of June 30, 2022 and December 31, 2021, respectively. The associated bank loan carrying values totaled $100,503,091 and $85,663,148 as of June 30, 2022 and December 31, 2021, respectively.

During the three and six months ended June 30, 2022 and 2021, the Company did not record any impairment losses on commercial real estate held for investment or held for sale. Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

The Company’s commercial real estate held for investment is summarized as follows:

	Net Ending Balance				Total Square Footage
	June 30 2022		December 31 2021		June 30 2022		December 31 2021
Utah (1)		152,758,740		150,105,948		625,920		625,920
Louisiana		2,403,729		2,426,612		31,778		31,778
Mississippi		2,906,265		2,860,775		19,694		19,694
	$	158,068,734	$	155,393,335		677,392		677,392

(1) Includes Center53 phase 1 and phase 2

The Company’s commercial real estate held for sale is summarized as follows:

	Net Ending Balance				Total Square Footage
	June 30 2022		December 31 2021		June 30 2022		December 31 2021
Kansas		2,000,000		2,000,000		222,679		222,679
California		389,145		389,145		2,872		2,872
Mississippi (1)		151,553		151,553		-		-
	$	2,540,698	$	2,540,698		225,551		225,551

(1) Approximately 93 acres of undeveloped land

These properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months.

Residential Real Estate Held for Investment and Held for Sale

The Company owns a small portfolio of residential homes primarily as a result of loan foreclosures. The Company has the option to sell them or to continue to hold them for cash flow and acceptable returns. The Company also invests in residential subdivision land developments.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The Company established Security National Real Estate Services (“SNRE”) 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.

The net ending balance of foreclosed residential real estate included in residential real estate held for sale was $200,962 and $1,190,602 as of June 30, 2022 and December 31, 2021, respectively.

During the three months ended June 30, 2022 and 2021 the Company did not record any impairment losses on residential real estate held for sale or held for investment. During the six months ended June 30, 2022 and 2021 the Company recorded impairment losses on residential real estate held for sale of $94,400 and nil, respectively. Impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

The Company’s residential real estate held for investment is summarized as follows:

	Net Ending Balance
	June 30 2022		December 31 2021
Utah (1)		38,486,971	$	41,686,281
Washington (2)		-		286,181
	$	38,486,971	$	41,972,462

(1)	Includes subdivision land developments
(2)	Improved residential lots

The following table presents additional information regarding the Company’s subdivision land developments in Utah.

	June 30 2022		December 31 2021
Lots developed		48		67
Lots to be developed		1,348		548
Ending Balance	$	38,285,419	$	41,479,434

The Company’s residential real estate held for sale is summarized as follows:

	Net Ending Balance
	June 30 2022		December 31 2021
Texas	$	200,962	$	200,962
Nevada		-		979,640
Ohio		-		10,000
	$	200,962	$	1,190,602

These properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

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. As of June 30, 2022, real estate owned and occupied by the Company is summarized as follows:

Location	Business Segment	Approximate Square Footage		Square Footage Occupied by the Company
433 West Ascension Way, Salt Lake City, UT - Center53 Building 2	Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales		221,000		50	%
1044 River Oaks Dr., Flowood, MS	Life Insurance Operations		19,694		28	%
1818 Marshall Street, Shreveport, LA (1)	Life Insurance Operations		12,274		100	%
909 Foisy Street, Alexandria, LA (1)	Life Insurance Sales		8,059		100	%
812 Sheppard Street, Minden, LA (1)	Life Insurance Sales		1,560		100	%
1550 N 3rd Street, Jena, LA (1)	Life Insurance Sales		1,737		100	%

(1) Included in property and equipment on the consolidated balance sheets

Mortgage Loans Held for Investment

Mortgage loans held for investment consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, maturity dates range from nine 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 June 30, 2022, the Company had 79%, 5%, 4%, 4%, 2% and 2% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada, and Arizona, respectively. At December 31, 2021, the Company had 70%, 7%, 5%, 4%, 4% and 2% of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, Nevada and Arizona, respectively.

Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs, premiums, discounts and the related allowance for loan losses. Interest income is included in net investment income on the condensed consolidated statements of earnings and is recognized when earned. The Company defers related material loan origination fees, net of related direct loan origination costs, and amortizes the net fees over the term of the loans. Origination fees are included in net investment income on the condensed consolidated statements of earnings.

Mortgage loans are secured by the underlying property and require an appraisal at the time of underwriting and funding. Generally, the Company will fund a loan not to exceed 80% of the fair market value of the loan’s collateral. Amounts over 80% will require additional collateral or mortgage insurance by an approved third-party insurer.

The Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account). The allowance is comprised of two components. The first component is an allowance for collectively evaluated impairment that is based upon the Company’s historical experience in collecting similar receivables. The second component is based upon individual evaluation of loans that are determined to be impaired. As a practical expedient, upon determining impairment, the Company establishes an individual impairment allowance based upon an assessment of the fair value of the underlying collateral. In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income. When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment or held for sale.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the performance status of the loans, or the Company’s actual collection experience. The actual losses could change, in the near term, from the established allowance, based upon the occurrence or non-occurrence of these events.

For purposes of determining the allowance for losses, the Company has segmented its mortgage loans held for investment by loan type. The Company’s loan types are commercial, residential, and residential construction. The inherent risks within the portfolio vary depending upon the loan type as follows:

Commercial - Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation as agreed. Commercial loans are made primarily based on the underlying collateral supporting the loan. Accordingly, the repayment of a commercial loan depends primarily on the collateral and its ability to generate income and secondarily on the borrower’s (or guarantors) ability to repay.

Residential — Secured by family dwelling units. These loans are secured by first and second mortgages on the unit. The borrower’s ability to repay is sensitive to the life events and general economic condition of the region. Where loan to value exceeds 80%, the loan is generally guaranteed by private mortgage insurance, FHA or VA.

Residential construction (including land acquisition and development) – Underwritten in accordance with the Company’s underwriting policies which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent appraisal valuations. These loans will rely on the value associated with the project upon completion. These cost and valuation estimates may be inaccurate. Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing. Additionally, land is underwritten according to the Company’s policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These cost and valuation estimates may be inaccurate. These loans are considered to be of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio. The following table presents the valuation allowance for loan losses as a contra-asset account.

	Commercial		Residential			Residential Construction		Total
June 30, 2022
Allowance for credit losses:
Beginning balance - January 1, 2022	$	187,129	$	1,469,571		$	43,202	$	1,699,902
Charge-offs		-		-			-		-
Provision		-		(223,007	)		-		(223,007	)
Ending balance - June 30, 2022	$	187,129	$	1,246,564		$	43,202	$	1,476,895
Ending balance: individually evaluated for impairment	$	-	$	63,310		$	-	$	63,310
Ending balance: collectively evaluated for impairment	$	187,129	$	1,183,254		$	43,202	$	1,413,585
Mortgage loans:
Ending balance - June 30, 2022	$	34,050,215	$	40,355,630		$	203,130,224	$	277,536,069
Ending balance: individually evaluated for impairment	$	501,949	$	1,294,512		$	415,904	$	2,212,365
Ending balance: collectively evaluated for impairment	$	33,548,266	$	39,061,118		$	202,714,320	$	275,323,704
December 31, 2021
Allowance for credit losses:
Beginning balance - January 1, 2021	$	187,129	$	1,774,796		$	43,202	$	2,005,127
Charge-offs		-		-			-		-
Provision		-		(305,225	)		-		(305,225	)
Ending balance - December 31, 2021	$	187,129	$	1,469,571		$	43,202	$	1,699,902
Ending balance: individually evaluated for impairment	$	-	$	105,384		$	-	$	105,384
Ending balance: collectively evaluated for impairment	$	187,129	$	1,364,187		$	43,202	$	1,594,518
Mortgage loans:
Ending balance - December 31, 2021	$	51,683,022	$	53,533,712		$	175,117,783	$	280,334,517
Ending balance: individually evaluated for impairment	$	1,723,372	$	2,548,656		$	-	$	4,272,028
Ending balance: collectively evaluated for impairment	$	49,959,650	$	50,985,056		$	175,117,783	$	276,062,489	(1)

(1) Amount corrected from that previously reported due to a typographical error.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

The following table presents the aging of mortgage loans held for investment.

	Commercial			Residential			Residential  Construction			Total
June 30, 2022
30-59 Days Past Due	$	2,824,716		$	2,433,116		$	683,087		$	5,940,919
60-89 Days Past Due		-			341,870			-			341,870
Greater Than 90 Days (1)		-			917,135			415,904			1,333,039
In Process of Foreclosure (1)		501,949			377,377			-			879,326
Total Past Due		3,326,665			4,069,498			1,098,991			8,495,154
Current		30,723,550			36,286,132			202,031,233			269,040,915
Total Mortgage Loans		34,050,215			40,355,630			203,130,224			277,536,069
Allowance for Loan Losses		(187,129	)		(1,246,564	)		(43,202	)		(1,476,895	)
Unamortized deferred loan fees, net		(71,921	)		(385,559	)		(557,856	)		(1,015,336	)
Unamortized discounts, net		(238,128	)		(114,084	)		-			(352,212	)
Net Mortgage Loans	$	33,553,037		$	38,609,423		$	202,529,166		$	274,691,626
December 31, 2021
30-59 Days Past Due	$	-		$	3,117,826		$	1,363,127		$	4,480,953
60-89 Days Past Due		100,204			580,815			-			681,019
Greater Than 90 Days (1)		1,723,372			2,052,062			-			3,775,434
In Process of Foreclosure (1)		-			496,594			-			496,594
Total Past Due		1,823,576			6,247,297			1,363,127			9,434,000
Current		49,859,446			47,286,415			173,754,656			270,900,517
Total Mortgage Loans		51,683,022			53,533,712			175,117,783			280,334,517
Allowance for Loan Losses		(187,129	)		(1,469,571	)		(43,202	)		(1,699,902	)
Unamortized deferred loan fees, net		(36,813	)		(498,600	)		(383,173	)		(918,586	)
Unamortized discounts, net		(240,614	)		(169,369	)		-			(409,983	)
Net Mortgage Loans	$	51,218,466		$	51,396,172		$	174,691,408		$	277,306,046

(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

Impaired Mortgage Loans Held for Investment

Impaired mortgage loans held for investment 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 are summarized as follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
June 30, 2022
With no related allowance recorded:
Commercial	$	501,949	$	501,949	$	-	$	1,119,350	$	-
Residential		650,488		650,488		-		848,525		-
Residential construction		415,904		415,904		-		207,952		-
With an allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-
Residential		644,024		644,024		63,310		730,672		-
Residential construction		-		-		-		-		-
Total:
Commercial	$	501,949	$	501,949	$	-	$	1,119,350	$	-
Residential		1,294,512		1,294,512		63,310		1,579,197		-
Residential construction		415,904		415,904		-		207,952		-
December 31, 2021
With no related allowance recorded:
Commercial	$	1,723,372	$	1,723,372	$	-	$	1,053,865	$	-
Residential		1,591,368		1,591,368		-		2,731,421		-
Residential construction		-		-		-		100,481		-
With an allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-
Residential		957,288		957,288		105,384		726,449		-
Residential construction		-		-		-		-		-
Total:
Commercial	$	1,723,372	$	1,723,372	$	-	$	1,053,865	$	-
Residential		2,548,656		2,548,656		105,384		3,457,870		-
Residential construction		-		-		-		100,481		-

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)

3) Investments (Continued)

Credit Risk Profile Based on Performance Status

The Company’s mortgage loan held for investment 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 held for investment are summarized as follows:

	Commercial				Residential				Residential Construction				Total
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Performing	$	33,548,266	$	49,959,650	$	39,061,118	$	50,985,056	$	202,714,320	$	175,117,783	$	275,323,704	$	276,062,489
Non-performing		501,949		1,723,372		1,294,512		2,548,656		415,904		-		2,212,365		4,272,028
Total	$	34,050,215	$	51,683,022	$	40,355,630	$	53,533,712	$	203,130,224	$	175,117,783	$	277,536,069	$	280,334,517

Non-Accrual Mortgage Loans Held for Investment

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 interest income that had been accrued. Payments received for loans on a non-accrual status are recognized on a cash basis. Interest income recognized from any payments received for loans on a non-accrual status was immaterial. Accrual of interest resumes if a loan is brought current. Interest not accrued on these loans totaled approximately $135,000 and $236,000 as of June 30, 2022 and December 31, 2021, respectively.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022 (Unaudited)