Investments (Tables)

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Investments

The Company’s investments as of June 30, 2023 are summarized as follows:

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses (1)			Allowance for Credit Losses			Estimated Fair Value
June 30, 2023:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	$	99,323,377		$	50,602	$	(2,554,426	)	$	-		$	96,819,553
Obligations of states and political subdivisions		6,757,087			403		(378,987	)		-			6,378,503
Corporate securities including public utilities		232,127,146			2,177,346		(11,487,153	)		(224,005	)		222,593,334
Mortgage-backed securities		33,273,655			169,558		(4,704,791	)		-			28,738,422
Redeemable preferred stock		250,000			10,000		-			-			260,000
Total fixed maturity securities available for sale	$	371,731,265		$	2,407,909	$	(19,125,357	)	$	(224,005	)	$	354,789,812
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$	10,416,580		$	2,976,949	$	(591,604	)				$	12,801,925
Total equity securities at estimated fair value	$	10,416,580		$	2,976,949	$	(591,604	)				$	12,801,925
Mortgage loans held for investment at amortized cost:
Residential	$	95,208,040
Residential construction		121,322,532
Commercial		59,205,487
Less: Unamortized deferred loan fees, net		(1,689,405	)
Less: Allowance for credit losses		(2,663,560	)
Less: Net discounts		(333,509	)
Total mortgage loans held for investment	$	271,049,585
Real estate held for investment - net of accumulated depreciation:
Residential	$	30,680,836
Commercial		150,282,066
Total real estate held for investment	$	180,962,902
Real estate held for sale:
Residential	$	1,675,921
Commercial		151,553
Total real estate held for sale	$	1,827,474
Other investments and policy loans at amortized cost:
Policy loans	$	13,020,654
Insurance assignments		41,157,301
Federal Home Loan Bank stock (2)		2,677,100
Other investments		9,389,786
Less: Allowance for credit losses for insurance assignments		(1,690,693	)
Total other investments and policy loans	$	64,554,148
Accrued investment income	$	10,188,551
Total investments	$	896,174,397

(1) Gross unrealized losses are net of allowance for credit losses

(2) Includes $84,800 of Membership stock and $2,592,300 of Activity stock attributable to short-term borrowings and letters of credit.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

3) Investments (Continued)

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 credit 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 credit losses for insurance assignments		(1,609,951	)
Total other investments and policy loans	$	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 attributable to short-term borrowings and letters of credit.

Schedule of Fair Value of Fixed Maturity Securities

	Unrealized Losses for Less than Twelve Months		Fair Value		Unrealized Losses for More than Twelve Months		Fair Value		Total Unrealized Loss		Combined Fair Value
At June 30, 2023
U.S. Treasury Securities And Obligations of U.S. Government Agencies	$	872,936	$	56,265,029	$	1,681,490	$	28,818,980	$	2,554,426	$	85,084,009
Obligations of States and Political Subdivisions		159,415		3,758,985		219,572		2,149,115		378,987		5,908,100
Corporate Securities		3,664,905		96,981,686		7,822,248		71,988,258		11,487,153		168,969,944
Mortgage and other asset-backed securities		497,345		5,241,798		4,207,446		20,951,604		4,704,791		26,193,402
Totals	$	5,194,601	$	162,247,498	$	13,930,756	$	123,907,957	$	19,125,357	$	286,155,455
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
Totals	$	16,883,189	$	267,774,539	$	2,291,672	$	13,189,587	$	19,174,861	$	280,964,126

Schedule of Allowance for Credit Losses on Fixed Maturity Securities Available for Sale

The following table presents a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale:

	Six Months Ended June 30, 2023
	U.S. Treasury Securities And Obligations of U.S. Government Agencies		Obligations of states and political subdivisions		Corporate securities		Mortgage-backed securities		Total
Beginning balance	$	-	$	-	$	-	$	-	$	-
Additions for credit losses not previously recorded		-		-		179,500		-		179,500
Change in allowance on securities with previous allowance		-		-		44,505		-		44,505
Reductions for securities sold during the period		-		-		-		-		-
Reductions for securities with credit losses due to intent to sell		-		-		-		-		-
Write-offs charged against the allowance		-		-		-		-		-
Recoveries of amounts previously written off		-		-		-		-		-
Ending Balance	$	-	$	-	$	224,005	$	-	$	224,005

Schedule of Earnings on Fixed Maturity Securities

The following table presents a roll forward of the Company’s cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale which was required to be presented prior to the adoption of ASU 2016-13:

	2022
Balance of credit-related OTTI at January 1	$	264,977
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

Schedule of Investments Classified by Contractual Maturity Date

The table below presents the amortized cost and the estimated fair value of fixed maturity securities available for sale at June 30, 2023, by contractual maturity. Actual or 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	$	19,976,902	$	19,882,628
Due in 2-5 years		149,667,318		144,707,290
Due in 5-10 years		82,678,874		79,333,563
Due in more than 10 years		85,884,516		81,867,909
Mortgage-backed securities		33,273,655		28,738,422
Redeemable preferred stock		250,000		260,000
Total	$	371,731,265	$	354,789,812

Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

The following table summarizes the credit quality, by NAIC designation, of the Company’s fixed maturity securities available for sale, excluding redeemable preferred stock.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

3) Investments (Continued)

	June 30, 2023				December 31, 2022
NAIC Designation	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
1	$	203,707,382	$	195,622,815	$	197,753,818	$	189,691,540
2		160,122,716		151,974,611		156,261,804		148,073,873
3		5,667,117		5,264,194		7,080,305		6,635,786
4		1,720,314		1,563,190		1,377,541		1,157,454
5		262,465		104,832		25,736		39,155
6		1,271		170		1,307		684
Total	$	371,481,265	$	354,529,812	$	362,500,511	$	345,598,492

Schedule of Major Categories of Net Investment Income

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023			2022
Proceeds from sales	$	-	$	233,000		$	955,610		$	688,651
Gross realized gains		-		-			11,257			2,354
Gross realized losses		-		(7,825	)		(54,104	)		(7,845	)

 

Major categories of net investment income were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Fixed maturity securities available for sale	$	4,143,768		$	2,811,650		$	8,156,500		$	5,447,866
Equity securities		140,709			119,798			281,216			242,834
Mortgage loans held for investment		9,467,407			9,244,464			17,955,063			17,204,642
Real estate held for investment and sale		4,897,672			4,012,192			8,262,596			7,052,226
Policy loans		207,441			207,301			407,655			513,583
Insurance assignments		4,461,813			4,093,723			9,230,016			9,490,710
Other investments		213,103			98,361			342,160			169,006
Cash and cash equivalents		780,146			108,431			1,567,907			183,732
Gross investment income		24,312,059			20,695,920			46,203,113			40,304,599
Investment expenses		(4,140,085	)		(4,724,632	)		(8,256,256	)		(9,139,005	)
Net investment income	$	20,171,974		$	15,971,288		$	37,946,857		$	31,165,594

 

Schedule of Commercial Real Estate Investment

The Company’s commercial real estate held for investment is summarized as follows as of the respective dates indicated:

	Net Book Value				Total Square Footage
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Utah (1)	$	144,998,640	$	147,627,946		625,920		625,920
Louisiana		2,357,964		2,380,847		31,778		31,778
Mississippi		2,925,462		2,881,863		19,694		19,694
	$	150,282,066	$	152,890,656		677,392		677,392

(1) Includes Center53

The Company’s commercial real estate held for sale is summarized as follows as of the respective dates indicated:

	Net Book Value
	June 30, 2023		December 31, 2022
Mississippi (1)	$	151,553	$	151,553
	$	151,553	$	151,553

(1) Consists of approximately 93 acres of undeveloped land

Schedule of Residential Real Estate Investment

The Company’s residential real estate held for investment is summarized as follows as of the respective dates indicated:

	Net Book Value
	June 30, 2023		December 31, 2022
Utah (1)	$	30,680,836	$	38,437,960
	$	30,680,836	$	38,437,960

(1) Includes residential subdivision development

The following table presents additional information regarding the Company’s residential subdivision development in Utah:

	June 30, 2023		December 31, 2022
Lots developed		42		80
Lots to be developed		931		1,131
Book Value	$	30,489,876	$	38,241,705

The Company’s residential real estate held for sale is summarized as follows as of the respective dates indicated:

	Net Book Value
	June 30, 2023			December 31, 2022
Utah	$	1,675,921	(1)	$	11,010,029
	$	1,675,921		$	11,010,029

(1) Unimproved land

Schedule of 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, 2023, 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 (1)	Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales		221,000		50	%
1044 River Oaks Dr., Flowood, MS (1)	Life Insurance Operations		19,694		28	%
1818 Marshall Street, Shreveport, LA (2)	Life Insurance Operations		12,274		100	%
909 Foisy Street, Alexandria, LA (2)	Life Insurance Sales		8,059		100	%
812 Sheppard Street, Minden, LA (2)	Life Insurance Sales		1,560		100	%
1550 N 3rd Street, Jena, LA (2)	Life Insurance Sales		1,737		100	%

(1) Included in real estate held for investment on the condensed consolidated balance sheets

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

Schedule of Allowance for Loan Losses

The following table presents a roll forward of the allowance for credit losses as of the dates indicated:

	Commercial		Residential			Residential Construction			Total
June 30, 2023
Allowance for credit losses:
Beginning balance - January 1, 2023	$	187,129	$	1,739,980		$	43,202		$	1,970,311
Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-13)		555,807		(192,607	)		301,830			665,030	(1)
Change in provision for credit losses		88,119		42,487			(102,387	)		28,219	(2)
Charge-offs		-		-			-			-
Ending balance - June 30, 2023	$	831,055	$	1,589,860		$	242,645		$	2,663,560
December 31, 2022
Allowance for credit losses:
Beginning balance - January 1, 2022	$	187,129	$	1,469,571		$	43,202		$	1,699,902
Change in provision for credit losses		-		270,409			-			270,409	(2)
Charge-offs		-		-			-			-
Ending balance - December 31, 2022	$	187,129	$	1,739,980		$	43,202		$	1,970,311

(1) See Note 2 of the notes to the condensed consolidated financial statements

(2) Included in other expenses on the condensed consolidated statements of earnings

Schedule of Aging of Mortgage Loans

The following table presents the aging of mortgage loans held for investment by loan type as of the dates indicated:

	Commercial			Residential			Residential Construction			Total
June 30, 2023
30-59 days past due	$	5,960,468		$	7,202,883		$	2,383,665		$	15,547,016
60-89 days past due		-			276,674			-			276,674
Over 90 days past due (1)		596,508			1,721,703			-			2,318,211
In process of foreclosure (1)		-			289,922			-			289,922
Total past due		6,556,976			9,491,182			2,383,665			18,431,823
Current		52,648,511			85,716,858			118,938,867			257,304,236
Total mortgage loans		59,205,487			95,208,040			121,322,532			275,736,059
Allowance for credit losses		(831,055	)		(1,589,860	)		(242,645	)		(2,663,560	)
Unamortized deferred loan fees, net		(258,265	)		(1,134,554	)		(296,586	)		(1,689,405	)
Unamortized discounts, net		(223,847	)		(109,662	)		-			(333,509	)
Net mortgage loans	$	57,892,320		$	92,373,964		$	120,783,301		$	271,049,585
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
Over 90 days past due (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 credit 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

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

Schedule of Commercial Mortgage Loans By Credit Quality Indicator

The aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of June 30, 2023:

Credit Quality Indicator	2023		2022			2021		2020		2019		Prior		Total		% of Total
LTV:
Less than 65%	$	17,525,000	$	14,375,274		$	3,821,772	$	-	$	3,006,722	$	6,898,150	$	45,626,918		77.07	%
65% to 80%		-		5,630,731			2,100,000		4,913,313		-		-		12,644,044		21.36	%
Greater than 80%		-		529,525			405,000		-		-		-		934,525		1.58	%
Total	$	17,525,000	$	20,535,530		$	6,326,772	$	4,913,313	$	3,006,722	$	6,898,150	$	59,205,487		100.00	%
DSCR
>1.20x	$	5,725,000	$	1,000,000		$	2,800,000	$	4,913,313	$	3,006,722	$	2,777,481	$	20,222,516		34.16	%
1.00x - 1.20x		5,300,000		10,750,376			3,526,772		-		-		4,120,669		23,697,817		40.03	%
<1.00x		6,500,000		8,785,154	(1)		-		-		-		-		15,285,154		25.82	%
Total	$	17,525,000	$	20,535,530		$	6,326,772	$	4,913,313	$	3,006,722	$	6,898,150	$	59,205,487		100.00	%

(1) Commercial construction loan

The Company evaluates and monitors the credit quality of its residential mortgage loans by analyzing loan performance. The Company defines non-performing mortgage loans as loans more than 90 days past due and on a non-accrual status. Monitoring a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.

The aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of June 30, 2023:

Credit Quality Indicator	2023		2022		2021		2020		2019		Prior		Total		% of Total
Performance Indicators:
Performing	$	4,842,385	$	57,085,363	$	7,750,923	$	7,737,211	$	3,103,802	$	12,676,732	$	93,196,416		97.89	%
Non-performing (1)		-		298,572		365,460		-		317,501		1,030,091		2,011,624		2.11	%
Total	$	4,842,385	$	57,383,935	$	8,116,383	$	7,737,211	$	3,421,303	$	13,706,823	$	95,208,040		100.00	%

(1) Includes residential mortgage loans in the process of foreclosure of $289,922 at June 30, 2023

Schedule of Residential Construction Mortgage Loans

The aggregate unpaid principal balance of residential construction mortgage loans by credit quality indicator and origination year was as follows as of June 30, 2023:

Credit Quality Indicator	2023		2022		2021		Total		% of Total
Performance Indicators:
Performing	$	32,159,616	$	49,757,061	$	39,405,855	$	121,322,532		100.00	%
Non-performing		-		-		-		-		0.00	%
Total	$	32,159,616	$	49,757,061	$	39,405,855	$	121,322,532		100.00	%
LTV:
Less than 65%	$	22,977,981	$	26,504,890	$	4,005,001	$	53,487,872		44.09	%
65% to 80%		9,181,635		23,252,171		35,400,854		67,834,660		55.91	%
Greater than 80%		-		-		-		-		0.00	%
Total	$	32,159,616	$	49,757,061	$	39,405,855	$	121,322,532		100.00	%

Schedule of Aging of Insurance Assignments

The following table presents the aging of insurance assignments, included in other investments and policy loans on the condensed consolidated balance sheets:

	As of June 30, 2023			As of December 31, 2022
30-59 days past due	$	7,756,991		$	10,621,443
60-89 days past due		3,093,411			3,997,484
Over 90 days past due		4,844,022			5,813,013
Total past due		15,694,424			20,431,941
Current		25,462,877			26,510,594
Total insurance assignments		41,157,301			46,942,536
Allowance for credit losses		(1,690,693	)		(1,609,951	)
Net insurance assignments	$	39,466,608		$	45,332,585

Schedule of Allowance for Credit Losses

The following table presents a roll forward of the allowance for credit losses as a contra-asset account for insurance assignments:

	Allowance
Beginning balance - January 1, 2023	$	1,609,951
Change in provision for credit losses		452,326	(1)
Charge-offs		(371,584	)
Ending balance - June 30, 2023	$	1,690,693
Beginning balance - January 1, 2022	$	1,686,218
Change in provision for credit losses		889,480	(1)
Charge-offs		(965,747	)
Ending balance - December 31, 2022	$	1,609,951

(1) Included in other expenses on the condensed consolidated statements of earnings

Schedule of Gain (Loss) on Investments

The following table presents the realized gains and losses from sales, calls, and maturities, and unrealized gains and losses on equity securities from investments and other assets:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Fixed maturity securities:
Gross realized gains	$	1,563		$	129,512		$	17,054		$	175,635
Gross realized losses		(36,908	)		(9,828	)		(91,799	)		(10,758	)
Net credit loss (provision) release		(44,505	)		-			(224,005	)		-
Equity securities:
Gains (losses) on securities sold		5,363			81,596			(46,952	)		71,317
Unrealized gains and (losses) on securities held at the end of the period		566,633			(2,106,375	)		898,064			(2,713,422	)
Real estate held for investment and sale:
Gross realized gains		161,028			364,150			161,028			1,239,331
Gross realized losses		-			(94,400	)		-			(98,222	)
Other assets, including call and put option derivatives:
Gross realized gains		163,410			720,950			214,348			593,699
Gross realized losses		-			-			-			-
Total	$	816,584		$	(914,395	)	$	927,738		$	(742,420	)

Schedule of Accrued Investment Income

Accrued investment income consists of the following:

	As of June 30, 2023		As of December 31, 2022
Fixed maturity securities available for sale	$	3,566,511	$	3,563,767
Equity securities		12,858		14,496
Mortgage loans held for investment		3,042,343		3,220,709
Real estate held for investment		3,517,092		3,455,305
Policy Loans		42,151		37,951
Cash and cash equivalents		7,596		7,598
Total accrued investment income	$	10,188,551	$	10,299,826