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Investments
 12 Months Ended
Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]  
Investments

2) Investments

 

The Company’s investments as of December 31, 2022 are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
U.S. Treasury securities and obligations of U.S. Government agencies  $93,182,210   $180,643   $(2,685,277)  $90,677,576 
                     
Obligations of states and political subdivisions   6,675,071    13,869    (458,137)   6,230,803 
                     
Corporate securities including public utilities   229,141,544    1,909,630    (11,930,773)   219,120,401 
                     
Mortgage-backed securities   33,501,686    168,700    (4,100,674)   29,569,712 
                     
Redeemable preferred stock   250,000    10,000    -    260,000 
                     
Total fixed maturity securities available for sale  $362,750,511   $2,282,842   $(19,174,861)  $345,858,492 
                     
Equity securities at estimated fair value:                    
                     
Common stock:                    
                     
Industrial, miscellaneous and all other  $9,942,265   $2,688,375   $(948,114)  $11,682,526 
                     
Total equity securities at estimated fair value  $9,942,265   $2,688,375   $(948,114)  $11,682,526 
                     
Mortgage loans held for investment at amortized cost:                    
Residential  $93,355,623                
Residential construction   172,516,125                
Commercial   46,311,955                
Less: Unamortized deferred loan fees, net   (1,746,605)               
Less: Allowance for loan losses   (1,970,311)               
Less: Net discounts   (342,860)               
                     
Total mortgage loans held for investment  $308,123,927                
                     
Real estate held for investment - net of accumulated depreciation:                    
Residential  $38,437,960                
Commercial   152,890,656                
                     
Total real estate held for investment  $191,328,616                
                     
Real estate held for sale:                    
Residential  $11,010,029                
Commercial   151,553                
                     
Total real estate held for sale  $11,161,582                
                     
Other investments and policy loans at amortized cost:                    
Policy loans  $13,095,473                
Insurance assignments   46,942,536                
Federal Home Loan Bank stock (1)   2,600,300                
Other investments   9,479,798                
Less: Allowance for doubtful accounts   (1,609,951)               
                     
Total policy loans and other investments  $70,508,156                
                     
Accrued investment income  $10,299,826                
                     
Total investments  $948,963,125                

 

(1)Includes $938,500 of Membership stock and $1,661,800 of Activity stock due to short-term advances and letters of credit.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) 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 Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

Fixed Maturity Securities

 

The following table summarizes unrealized losses on fixed maturities securities available for sale that were carried at estimated fair value at December 31, 2022 and at December 31, 2021. The unrealized losses were primarily related to interest rate fluctuations and inflation. 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   Total Unrealized Loss   Fair Value 
At December 31, 2022                              
U.S. Treasury securities and obligations of U.S. Government agencies  $2,685,277   $79,400,753   $-   $-   $2,685,277   $79,400,753 
Obligations of States and Political Subdivisions   378,067    5,467,910    80,070    429,020    458,137    5,896,930 
Corporate Securities   10,935,114    162,995,969    995,659    5,781,822    11,930,773    168,777,791 
Mortgage and other asset-backed securities   2,884,731    19,909,907    1,215,943    6,978,745    4,100,674    26,888,652 
Total unrealized losses  $16,883,189   $267,774,539   $2,291,672   $13,189,587   $19,174,861   $280,964,126 
                               
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 
Total unrealized losses  $148,448   $13,122,225   $368,541   $5,354,617   $516,989   $18,476,842 

 

There were 713 securities with fair value of 93.6% of amortized cost at December 31, 2022. There were 55 securities with fair value of 97.3% of amortized cost at December 31, 2021. Credit losses of nil and $39,502 have been recognized for the years ended December 31, 2022 and 2021, respectively.

 

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 Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) 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   -    39,502 
Securities previously impaired   -    - 
           
Reductions for credit impairments previously recognized on:          
Securities that matured or were sold during the period (realized)   (39,502)   (145,500)
Securities due to an increase in expected cash flows   -    - 
           
Balance of credit-related OTTI at December 31  $225,475   $264,977 

 

The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31, 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  $-   $- 
Due in 2-5 years   139,431,212    135,093,083 
Due in 5-10 years   87,552,213    84,011,366 
Due in more than 10 years   102,015,400    96,924,331 
Mortgage-backed securities   33,501,686    29,569,712 
Redeemable preferred stock   250,000    260,000 
Total  $362,750,511   $345,858,492 

 

The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company pledged a total of $93,034,880, at estimated fair value, of fixed maturity securities with the FHLB at December 31, 2022. These securities are used as collateral on any cash borrowings from the FHLB. As of December 31, 2022, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was $86,032,116.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) 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.

 

     2022     2021 
   Years Ended December 31 
   2022   2021 
Fixed maturity securities available for sale:          
Gross realized gains  $205,949   $984,740 
Gross realized losses   (43,776)   (139,728)
Other than temporary impairments   -    (39,502)
           
Equity securities:          
Gains (losses) on securities sold   (10,519)   390,597 
Unrealized gains (losses) on securities held at the
end of the period		   (2,109,556)   2,732,130 
           
Mortgage loans held for investment:          
Gross realized gains   -    1,890,826 
Gross realized losses   -    (4,190)
           
Real estate held for investment and sale:          
Gross realized gains   1,239,332    2,347,924 
Gross realized losses   (825,593)   (2,426,428)
           
Other assets, including call and put option derivatives:          
Gross realized gains   686,703    547,785 
Gross realized losses   -    (58,522)
Total  $(857,460)  $6,225,632 

 

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.

 

Net realized gains and losses includes gains and losses by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of $817,000 in net losses and $933,045 in net gains for the years ended December 31, 2022 and 2021, respectively.

 

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

 

   2022   2021 
   Years Ended December 31 
   2022   2021 
Proceeds from sales  $3,091,105   $2,896,351 
Gross realized gains   24,281    208,698 
Gross realized losses   (32,976)   (4,046)

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

Major categories of net investment income were as follows:

 

   2022   2021 
   Years Ended December 31 
   2022   2021 
Fixed maturity securities available for sale  $12,395,764   $10,769,979 
Equity securities   511,118    446,337 
Mortgage loans held for investment   34,949,763    28,758,614 
Real estate held for investment and sale   14,563,269    12,334,989 
Policy loans   932,362    940,890 
Insurance assignments   18,112,840    19,062,052 
Other investments   518,865    131,145 
Cash and cash equivalents   1,666,945    235,470 
Gross investment income   83,650,926    72,679,476 
Investment expenses   (17,453,334)   (14,414,793)
Net investment income  $66,197,592   $58,264,683 

 

Net investment income includes income earned by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of $2,404,277 and $1,472,295 for the years ended December 31, 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 for regulatory authorities as required by law amounted to $11,032,165 and $10,168,853 at December 31, 2022 and 2021, respectively (the December 31, 2021 amount has been corrected from that previously reported due to a typographical error). The restricted securities are included in various assets under investments on the accompanying consolidated balance sheets.

 

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses) at December 31, 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 segments in the form of acquisition, development and mortgage foreclosures. The Company reports real estate held for investment and held for sale pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.

 

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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

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 assets that provide operational efficiencies.

 

The Company currently owns and operates nine commercial properties in three 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 does use 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 $129,330,119 and $134,251,205 as of December 31, 2022 and 2021, respectively. The associated bank loan carrying values totaled $97,112,131 and $85,663,148 as of December 31, 2022 and 2021, respectively.

 

During the years ended December 31, 2022 and 2021, the Company recorded impairment losses on commercial real estate held for sale of nil and $2,028,378, respectively. Impairment losses are included in gains (losses) on investments and other assets on the consolidated statements of earnings.

 

During the years ended December 31, 2022 and 2021, the Company recorded depreciation expense on commercial real estate held for investment of $6,090,575 and $3,592,207, respectively. Commercial real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings.

 

Operating leases arise from the leasing of the Company’s commercial real estate held for investment. Initial lease terms generally range from three to ten years.

 

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

 

   Net Ending Balance   Total Square Footage 
   December 31   December 31 
   2022   2021   2022   2021 
Utah (1)  $147,627,946   $150,105,948    625,920    625,920 
Louisiana   2,380,847    2,426,612    31,778    31,778 
Mississippi   2,881,863    2,860,775    19,694    19,694 
                     
   $152,890,656   $155,393,335    677,392    677,392 

 

 

(1)Includes Center53 phase 1 and phase 2

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease payments to be received.

 

      
2023  $11,650,181 
2024   10,310,144 
2025   9,933,831 
2026   8,282,769 
2027   6,720,796 
Thereafter   50,530,849 
Total  $97,428,570 

 

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

 

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

 

 

(1)Approximately 93 acres of undeveloped land

 

This property is being marketed with the assistance of commercial real estate brokers in the markets where the property is located.

 

Residential Real Estate Held for Investment and Held for Sale

 

The Company occasionally 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.

 

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 residential portfolio across the country.

 

During the years ended December 31, 2022 and 2021, the Company recorded impairment losses on residential real estate held for sale of $94,400 and nil, respectively. These impairment losses are included in gains (losses) on investments and other assets on the consolidated statements of earnings.

 

During the years ended December 31, 2022 and 2021, the Company recorded depreciation expense on residential real estate held for investment of $10,592 and $12,850, respectively. Residential real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

The net ending balance of foreclosed residential real estate included in residential real estate held for investment or sale was $11,010,029 and $1,190,602 as of December 31, 2022 and 2021, respectively.

 

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

 

   Net Ending Balance 
   December 31 
   2022   2021 
Utah (1)  $38,437,960   $41,686,281 
Washington (2)   -    286,181 
   $38,437,960   $41,972,462 

 

 

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

 

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

 

   December 31 
   2022   2021 
Lots available for sale   80    67 
Lots to be developed   1,131    548 
Ending Balance  $38,241,705   $41,479,434 

 

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

 

   2022   2021 
   Net Ending Balance 
   December 31 
   2022   2021 
Utah  $11,010,029   $- 
Nevada   -    979,640 
Texas   -    200,962 
Ohio   -    10,000 
Real estate held for sale  $11,010,029   $1,190,602 

 

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

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

Real Estate Owned and Occupied by the Company

 

The primary business units of the Company occupy a portion of the commercial real estate owned by the Company. As of December 31, 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 Ascension Way, Floors 4, 5 and 6, 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

 

The Company reports mortgage loans held for investment pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.

 

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 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 December 31, 2022, the Company had 64%, 10%, 5%, 5%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, 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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) 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 
December 31, 2022                    
Allowance for credit losses:                    
Beginning balance  $187,129   $1,469,571   $43,202   $1,699,902 
Charge-offs   -    -    -    - 
Provision   -    270,409    -    270,409 
Ending balance  $187,129   $1,739,980   $43,202   $1,970,311 
                     
Ending balance: individually evaluated for impairment  $-   $225,667   $-   $225,667 
                     
Ending balance: collectively evaluated for impairment  $187,129   $1,514,313   $43,202   $1,744,644 
                     
Mortgage loans:                    
Ending balance  $46,311,955   $93,355,623   $172,516,125   $312,183,703 
                     
Ending balance: individually evaluated for impairment  $405,000   $2,162,385   $-   $2,567,385 
                     
Ending balance: collectively evaluated for impairment  $45,906,955   $91,193,238   $172,516,125   $309,616,318 
                     
December 31, 2021                    
Allowance for credit losses:                    
Beginning balance  $187,129   $1,774,796   $43,202   $2,005,127 
Charge-offs   -    -    -    - 
Provision   -    (305,225)   -    (305,225)
Ending balance  $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  $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 Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

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

 

   Commercial   Residential   Residential
Construction		   Total 
December 31, 2022                    
30-59 Days Past Due  $1,000,000   $3,553,390   $-   $4,553,390 
60-89 Days Past Due   -    814,184    -    814,184 
Greater Than 90 Days (1)   -    1,286,211    -    1,286,211 
In Process of Foreclosure (1)   405,000    876,174    -    1,281,174 
Total Past Due   1,405,000    6,529,959    -    7,934,959 
Current   44,906,955    86,825,664    172,516,125    304,248,744 
Total Mortgage Loans   46,311,955    93,355,623    172,516,125    312,183,703 
Allowance for Loan Losses   (187,129)   (1,739,980)   (43,202)   (1,970,311)
Unamortized deferred loan fees, net   (199,765)   (1,212,994)   (333,846)   (1,746,605)
Unamortized discounts, net   (230,987)   (111,873)   -    (342,860)
Net Mortgage Loans  $45,694,074   $90,290,776   $172,139,077   $308,123,927 
                     
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 Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) 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 
December 31, 2022                         
With no related allowance recorded:                         
Commercial  $405,000   $405,000   $-   $762,175   $- 
Residential   1,142,494    1,142,494    -    998,798    - 
Residential construction   -    -    -    103,976    - 
                          
With an allowance recorded:                         
Commercial  $-   $-   $-   $-   $- 
Residential   1,019,891    1,019,891    225,667    683,922    - 
Residential construction   -    -    -    -             - 
                          
Total:                         
Commercial  $405,000   $405,000   $-   $762,175   $- 
Residential   2,162,385    2,162,385    225,667    1,682,720    - 
Residential construction   -    -    -    103,976    - 
                          
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    - 

 

Credit Risk Profile Based on Performance Status

 

The Company’s mortgage loans 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.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

 

2) Investments (Continued)

 

The Company’s performing and non-performing mortgage loans held for investment are summarized as follows:

 

   Commercial   Residential   Residential Construction   Total 
   December 31   December 31   December 31   December 31 
   2022   2021   2022   2021   2022   2021   2022   2021 
                                 
Performing  $45,906,955   $49,959,650   $91,193,238   $50,985,056   $172,516,125   $175,117,783   $309,616,318   $276,062,489 
Non-performing   405,000    1,723,372    2,162,385    2,548,656    -    -    2,567,385    4,272,028 
                                         
Total  $46,311,955   $51,683,022   $93,355,623   $53,533,712   $172,516,125   $175,117,783   $312,183,703   $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 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 totals approximately $226,000 and $236,000 as of December 31, 2022 and 2021, respectively.

 

Principal Amounts Due

 

The following table presents the amortized cost and contractual payments on mortgage loans held for investment by category as of December 31, 2022. Expected principal payments may differ from contractual obligations because certain borrowers may elect to pay off mortgage obligations with or without early payment penalties.

 

       Principal   Principal   Principal 
       Amounts   Amounts   Amounts 
       Due in   Due in   Due 
   Total   1 Year   2-5 Years   Thereafter 
Residential  $93,355,623   $1,332,862   $10,000,042   $82,022,719 
Residential Construction   172,516,125    167,805,559    4,710,566    - 
Commercial   46,311,955    9,405,903    28,597,132    8,308,920 
Total  $312,183,703   $178,544,324   $43,307,740   $90,331,639 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021