Investments (Tables)

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Investments

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

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses (1)			Allowance for Credit Losses			Estimated Fair Value
September 30, 2023:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	$	108,680,913		$	5,981	$	(2,498,554	)	$	-		$	106,188,340
Obligations of states and political subdivisions		6,649,289			218		(586,789	)		-			6,062,718
Corporate securities including public utilities		231,814,067			600,075		(15,412,932	)		(211,500	)		216,789,710
Mortgage-backed securities		32,889,293			13,422		(5,755,224	)		-			27,147,491
Redeemable preferred stock		250,000			10,000		-			-			260,000
Total fixed maturity securities available for sale	$	380,283,562		$	629,696	$	(24,253,499	)	$	(211,500	)	$	356,448,259
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	$	10,470,974		$	2,684,920	$	(846,350	)				$	12,309,544
Total equity securities at estimated fair value	$	10,470,974		$	2,684,920	$	(846,350	)				$	12,309,544
Mortgage loans held for investment at amortized cost:
Residential	$	96,591,643
Residential construction		101,295,751
Commercial		55,991,027
Less: Unamortized deferred loan fees, net		(1,629,546	)
Less: Allowance for credit losses		(2,612,944	)
Less: Net discounts		(328,833	)
Total mortgage loans held for investment	$	249,307,098
Real estate held for investment - net of accumulated depreciation:
Residential	$	38,034,997
Commercial		146,656,466
Total real estate held for investment	$	184,691,463
Real estate held for sale:
Residential	$	2,285,707
Commercial		2,478,660
Total real estate held for sale	$	4,764,367
Other investments and policy loans at amortized cost:
Policy loans	$	13,154,845
Insurance assignments		42,624,001
Federal Home Loan Bank stock (2)		2,699,300
Other investments		9,330,532
Less: Allowance for credit losses for insurance assignments		(1,555,261	)
Total other investments and policy loans	$	66,253,417
Accrued investment income	$	12,266,695
Total investments	$	886,040,843

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

(2) Includes $978,600 of Membership stock and $1,720,700 of Activity stock attributable to short-term borrowings and letters of credit.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 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
September 30, 2023
U.S. Treasury Securities And Obligations of U.S. Government Agencies	$	331,740	$	36,115,986	$	2,166,815	$	69,967,155	$	2,498,555	$	106,083,141
Obligations of States and Political Subdivisions		155,458		1,469,753		431,331		4,142,748		586,789		5,612,501
Corporate Securities		4,092,910		86,409,480		11,320,021		106,047,158		15,412,931		192,456,638
Mortgage and other asset-backed securities		123,790		4,627,445		5,631,434		22,003,452		5,755,224		26,630,897
Totals	$	4,703,898	$	128,622,664	$	19,549,601	$	202,160,513	$	24,253,499	$	330,783,177
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 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.

	September 30, 2023				December 31, 2022
NAIC Designation	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
1	$	210,224,246	$	198,601,878	$	197,753,818	$	189,691,540
2		162,752,957		151,279,566		156,261,804		148,073,873
3		5,329,117		4,890,504		7,080,305		6,635,786
4		1,462,481		1,325,409		1,377,541		1,157,454
5		263,504		90,901		25,736		39,155
6		1,257		1		1,307		684
Total	$	380,033,562	$	356,188,259	$	362,500,511	$	345,598,492

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

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

	Nine Months Ended September 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 - December 31, 2022	$	-	$	-	$	-		$	-	$	-
Additions for credit losses not previously recorded		-		-		179,500			-		179,500
Change in allowance on securities with previous allowance		-		-		42,764			-		42,764
Reductions for securities sold during the period		-		-		(10,764	)		-		(10,764	)
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 - September 30, 2023	$	-	$	-	$	211,500		$	-	$	211,500

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2023 (Unaudited)

3) Investments (Continued)

	Three Months Ended September 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 - June 30, 2023	$	-	$	-	$	224,005		$	-	$	224,005
Additions for credit losses not previously recorded		-		-		-			-		-
Change in allowance on securities with previous allowance		-		-		(1,741	)		-		(1,741	)
Reductions for securities sold during the period		-		-		(10,764	)		-		(10,764	)
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 - September 30, 2023	$	-	$	-	$	211,500		$	-	$	211,500

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 September 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 as of September 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	$	6,818,008	$	6,812,398
Due in 2-5 years		160,874,392		155,802,499
Due in 5-10 years		93,763,663		88,297,470
Due in more than 10 years		85,688,206		78,128,401
Mortgage-backed securities		32,889,293		27,147,491
Redeemable preferred stock		250,000		260,000
Total	$	380,283,562	$	356,448,259

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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Proceeds from sales	$	207,522		$	1,198,240		$	1,163,132		$	1,886,891
Gross realized gains		-			21,926			11,257			24,281
Gross realized losses		(3,368	)		(24,811	)		(57,472	)		(32,656	)

Major categories of net investment income were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Fixed maturity securities available for sale	$	4,242,185		$	3,188,521		$	12,398,685		$	8,636,387
Equity securities		167,348			139,412			448,564			382,246
Mortgage loans held for investment		9,842,845			10,477,672			27,797,908			27,682,315
Real estate held for investment and sale		3,291,047			3,918,310			11,553,643			10,970,535
Policy loans		191,843			213,520			599,498			727,103
Insurance assignments		4,340,644			4,218,184			13,570,659			13,708,894
Other investments		213,560			181,597			555,720			350,603
Cash and cash equivalents		1,083,241			514,869			2,651,148			698,601
Gross investment income		23,372,713			22,852,085			69,575,825			63,156,684
Investment expenses		(4,124,250	)		(4,249,015	)		(12,380,505	)		(13,388,020	)
Net investment income	$	19,248,463		$	18,603,070		$	57,195,320		$	49,768,664

 

Schedule of Assets on Deposit With Life Insurance

Assets on deposit with life insurance regulatory authorities as required by law were as follows:

	As of September 30, 2023		As of December 31, 2022
Fixed maturity securities available for sale	$	6,248,114	$	8,817,959
Cash and cash equivalents		1,956,777		2,214,206
Total	$	8,204,891	$	11,032,165

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
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Utah (1)	$	143,735,609	$	147,627,946		625,920		625,920
Louisiana		19,416		2,380,847		1,622		31,778
Mississippi		2,901,441		2,881,863		19,694		19,694
	$	146,656,466	$	152,890,656		647,236		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				Total Square Footage
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Louisiana	$	2,327,107	$	-		30,156		-
Mississippi (1)		151,553		151,553		-		-
	$	2,478,660	$	151,553		30,156		-

(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
	September 30, 2023		December 31, 2022
Utah (1)	$	38,034,997	$	38,437,960
	$	38,034,997	$	38,437,960

(1) Includes residential subdivision development

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

	September 30, 2023		December 31, 2022
Lots developed		50		80
Lots to be developed		1,080		1,131
Book Value	$	37,846,685	$	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
	September 30, 2023			December 31, 2022
Utah		$ 2,285,707	(1)	$	11,010,029
	$	2,285,707		$	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 September 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
September 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) (1)		555,807		(192,607	)		301,830			665,030
Change in provision for credit losses (2)		67,246		52,797			(142,440	)		(22,397	)
Charge-offs		-		-			-			-
Ending balance - September 30, 2023	$	810,182	$	1,600,170		$	202,592		$	2,612,944
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 (2)		-		270,409			-			270,409
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
September 30, 2023
30-59 days past due	$	3,139,403		$	3,816,822		$	805,766		$	7,761,991
60-89 days past due		-			1,795,326			-			1,795,326
Over 90 days past due (1)		1,646,508			3,778,582			1,005,417			6,430,507
In process of foreclosure (1)		-			276,580			-			276,580
Total past due		4,785,911			9,667,310			1,811,183			16,264,404
Current		51,205,116			86,924,333			99,484,568			237,614,017
Total mortgage loans		55,991,027			96,591,643			101,295,751			253,878,421
Allowance for credit losses		(810,182	)		(1,600,170	)		(202,592	)		(2,612,944	)
Unamortized deferred loan fees, net		(145,572	)		(1,129,517	)		(354,457	)		(1,629,546	)
Unamortized discounts, net		(220,276	)		(108,557	)		-			(328,833	)
Net mortgage loans held for investment	$	54,814,997		$	93,753,399		$	100,738,702		$	249,307,098
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 held for investment	$	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 September 30, 2023:

Credit Quality Indicator	2023		2022			2021		2020		2019		Prior		Total		% of Total
LTV:
Less than 65%	$	17,525,000	$	13,396,458		$	3,800,378	$	-	$	2,989,026	$	6,796,621	$	44,507,483		79.49	%
65% to 80%		-		4,585,706			1,050,000		4,913,313		-		-		10,549,019		18.84	%
Greater than 80%		-		529,525			405,000		-		-		-		934,525		1.67	%
Total	$	17,525,000	$	18,511,689		$	5,255,378	$	4,913,313	$	2,989,026	$	6,796,621	$	55,991,027		100.00	%
DSCR
>1.20x	$	5,725,000	$	1,000,000		$	1,750,000	$	4,913,313	$	2,989,026	$	2,754,604	$	19,131,943		34.17	%
1.00x - 1.20x		5,300,000		8,496,130			3,505,378		-		-		4,042,017		21,343,525		38.12	%
<1.00x		6,500,000		9,015,559	(1)		-		-		-		-		15,515,559		27.71	%
Total	$	17,525,000	$	18,511,689		$	5,255,378	$	4,913,313	$	2,989,026	$	6,796,621	$	55,991,027		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 September 30, 2023:

Credit Quality Indicator	2023		2022		2021		2020		2019		Prior		Total		% of Total
Performance Indicators:
Performing	$	7,788,450	$	55,306,009	$	7,249,701	$	7,495,836	$	2,808,390	$	11,888,093	$	92,536,479		95.80	%
Non-performing (1)		324,111		838,669		741,534		800,486		-		1,350,364		4,055,164		4.20	%
Total	$	8,112,561	$	56,144,678	$	7,991,235	$	8,296,322	$	2,808,390	$	13,238,457	$	96,591,643		100.00	%

(1) Includes residential mortgage loans in the process of foreclosure of $276,580 as of September 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 September 30, 2023:

Credit Quality Indicator	2023		2022		2021		Total		% of Total
Performance Indicators:
Performing	$	48,525,276	$	27,213,555	$	24,551,503	$	100,290,334		99.01	%
Non-performing		-		1,005,417		-		1,005,417		0.99	%
Total	$	48,525,276	$	28,218,972	$	24,551,503	$	101,295,751		100.00	%
LTV:
Less than 65%	$	29,476,916	$	8,675,281	$	17,117,181	$	55,269,378		54.56	%
65% to 80%		19,048,360		19,543,691		7,434,322		46,026,373		45.44	%
Greater than 80%		-		-		-		-		0.00	%
Total	$	48,525,276	$	28,218,972	$	24,551,503	$	101,295,751		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 September 30, 2023			As of December 31, 2022
30-59 days past due	$	9,374,806		$	10,621,443
60-89 days past due		3,591,685			3,997,484
Over 90 days past due		4,611,748			5,813,013
Total past due		17,578,239			20,431,941
Current		25,045,762			26,510,594
Total insurance assignments		42,624,001			46,942,536
Allowance for credit losses		(1,555,261	)		(1,609,951	)
Net insurance assignments	$	41,068,740		$	45,332,585

Schedule of Allowance for Credit Losses

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

	Allowance
Beginning balance - January 1, 2023	$	1,609,951
Change in provision for credit losses (1)		667,260
Charge-offs		(721,950	)
Ending balance - September 30, 2023	$	1,555,261
Beginning balance - January 1, 2022	$	1,686,218
Change in provision for credit losses (1)		889,480
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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Fixed maturity securities:
Gross realized gains	$	37,565		$	30,121		$	54,619		$	205,755
Gross realized losses		(10,383	)		(26,203	)		(102,182	)		(36,961	)
Net credit loss (provision) release		1,740			-			(222,264	)		-
Equity securities:
Gains (losses) on securities sold		324,009			(131,472	)		277,057			(60,154	)
Unrealized losses on securities held at the end of the period		(1,321,511	)		(1,383,627	)		(423,448	)		(4,097,049	)
Real estate held for investment and sale:
Gross realized gains		36,166			-			197,194			1,260,548
Gross realized losses		-			(727,370	)		-			(825,593	)
Other assets, including call and put option derivatives:
Gross realized gains		-			59,599			214,348			632,082
Gross realized losses		-			-			-			-
Total	$	(932,414	)	$	(2,178,952	)	$	(4,676	)	$	(2,921,372	)

Schedule of Accrued Investment Income

Accrued investment income consists of the following:

	As of September 30, 2023		As of December 31, 2022
Fixed maturity securities available for sale	$	4,343,327	$	3,563,767
Equity securities		12,729		14,496
Mortgage loans held for investment		4,732,717		3,220,709
Real estate held for investment		3,158,708		3,455,305
Policy Loans		4,463		37,951
Cash and cash equivalents		14,751		7,598
Total accrued investment income	$	12,266,695	$	10,299,826