[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
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OF 1934
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
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OF 1934
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UTG, INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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20-2907892
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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5250 SOUTH SIXTH STREET
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P.O. BOX 5147
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SPRINGFIELD, IL 62705
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(Address of principal executive offices) (Zip Code)
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [X]
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PART I. Financial Information
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3
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Item 1. Financial Statements
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3
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Condensed Consolidated Balance Sheets
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3
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Condensed Consolidated Statements of Operations
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4
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Condensed Consolidated Statements of Comprehensive Income
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5
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Condensed Consolidated Statements of Cash Flows
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6
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Notes to Condensed Consolidated Financial Statements
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7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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17
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Item 4. Controls and Procedures
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22
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PART II. Other Information
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22
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Item 1. Legal Proceedings
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22
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Item 1A. Risk Factors
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22
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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22
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Item 3. Defaults Upon Senior Securities
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22
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Item 4. Mine Safety Disclosures
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22
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Item 5. Other Information
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22
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Item 6. Exhibits
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22
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Signatures
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23
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Exhibit Index
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24
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PART 1. FINANCIAL INFORMATION
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||||||||
Item 1. Financial Statements
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||||||||
UTG, Inc.
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||||||||
Condensed Consolidated Balance Sheets (Unaudited)
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||||||||
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ASSETS
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||||||||
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||||
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March 31,
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December 31,
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||||
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2013
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2012*
|
||||
Investments:
|
|
|
|
|
||||
Investments available for sale:
|
|
|
|
|
||||
Fixed maturities, at fair value (amortized cost $176,113,506 and $173,526,717)
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$
|
189,846,454
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$
|
187,327,285
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||||
Equity securities, at fair value (cost $29,747,616 and $29,497,001)
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30,535,174
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30,504,914
|
||||
Trading securities, at fair value (cost $6,656,101 and $14,714,333)
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6,426,288
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14,018,460
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Mortgage loans on real estate at amortized cost
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11,009,174
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17,671,554
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||||
Discounted mortgage loans on real estate at cost
|
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26,703,552
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26,336,953
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||||
Investment real estate
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71,025,034
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68,165,013
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||||
Policy loans
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12,397,405
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12,591,572
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Short-term investments
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6,263,937
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6,268,320
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||||
Total investments
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354,207,018
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362,884,071
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||||
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||||
Cash and cash equivalents
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26,287,257
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23,321,246
|
||||
Accrued investment income
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2,094,272
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2,444,790
|
||||
Reinsurance receivables:
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|
|
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||||
Future policy benefits
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29,045,254
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29,318,018
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||||
Policy claims and other benefits
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3,837,588
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4,492,430
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||||
Cost of insurance acquired
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11,434,677
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11,700,765
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||||
Deferred policy acquisition costs
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412,110
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426,218
|
||||
Property and equipment, net of accumulated depreciation
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1,302,948
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1,344,851
|
||||
Income tax receivable
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7,214
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|
20,035
|
||||
Other assets
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3,934,639
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5,381,969
|
||||
Total assets
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$
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432,562,977
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$
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441,334,393
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||||
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||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Liabilities:
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|||||||
Policy liabilities and accruals:
|
|
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||||
Future policyholder benefits
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$
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291,223,310
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$
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293,800,162
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||||
Policy claims and benefits payable
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4,669,151
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3,371,767
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||||
Other policyholder funds
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469,148
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477,948
|
||||
Dividend and endowment accumulations
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14,113,062
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14,072,513
|
||||
Income tax payable
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4,296
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2,042,786
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||||
Deferred income taxes
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12,139,693
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12,301,577
|
||||
Notes payable
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18,848,454
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18,857,954
|
||||
Trading securities, at fair value (proceeds $2,729,311 and $8,094,787)
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2,950,631
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7,552,704
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||||
Other liabilities
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9,391,959
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9,202,354
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||||
Total liabilities
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353,809,704
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361,679,765
|
||||
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|
||||
Shareholders' equity:
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|
||||
Common stock - no par value, stated value $.001 per share. Authorized 7,000,000 shares - 3,794,728 and 3,798,871 shares outstanding
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3,795
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3,799
|
||||
Additional paid-in capital
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44,283,699
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44,337,743
|
||||
Retained earnings
|
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21,007,046
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21,917,318
|
||||
Accumulated other comprehensive income
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|
9,581,350
|
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9,664,466
|
||||
Total UTG shareholders' equity
|
|
74,875,890
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75,923,326
|
||||
Noncontrolling interests
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3,877,383
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3,731,302
|
||||
Total shareholders' equity
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78,753,273
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79,654,628
|
||||
Total liabilities and shareholders' equity
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$
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432,562,977
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$
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441,334,393
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* Balance sheet audited at December 31, 2012.
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UTG, Inc.
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||||
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||||
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Condensed Consolidated Statements of Operations (Unaudited)
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||||
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Three Months Ended
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||
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March 31,
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March 31,
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2013
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2012
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Revenue:
|
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Premiums and policy fees
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$
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3,212,746
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$
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3,516,444
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Ceded reinsurance premiums and policy fees
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(775,702)
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(908,098)
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Net investment income
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4,381,392
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6,950,756
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Other income
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521,359
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547,694
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Revenues before realized gains
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7,339,795
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10,106,796
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Realized investment gains, net:
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Other-than-temporary impairments
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|
(26,926)
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0
|
Other realized investment gains, net
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71,649
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|
7,135,970
|
Total realized investment gains, net
|
|
44,723
|
|
7,135,970
|
Total revenue
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|
7,384,518
|
|
17,242,766
|
|
|
|
|
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Benefits and other expenses:
|
|
|
|
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Benefits, claims and settlement expenses:
|
|
|
|
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Life
|
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5,856,321
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|
5,870,808
|
Ceded Reinsurance benefits and claims
|
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(597,779)
|
|
(835,875)
|
Annuity
|
|
267,539
|
|
260,690
|
Dividends to policyholders
|
|
147,222
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|
140,624
|
Commissions and amortization of deferred policy acquisition costs
|
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(23,552)
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(152,813)
|
Amortization of cost of insurance acquired
|
|
266,088
|
|
286,375
|
Operating expenses
|
|
2,055,125
|
|
2,875,495
|
Interest expense
|
|
110,437
|
|
72,175
|
Total benefits and other expenses
|
|
8,081,401
|
|
8,517,479
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|
|
|
|
|
|
|
|
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Income (loss) before income taxes
|
|
(696,883)
|
|
8,725,287
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Income tax expense
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(67,308)
|
|
(3,225,556)
|
|
|
|
|
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Net income (loss)
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|
(764,191)
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|
5,499,731
|
|
|
|
|
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Net income attributable to noncontrolling interests
|
|
(146,081)
|
|
(273,214)
|
|
|
|
|
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Net income (loss) attributable to common shareholders'
|
$
|
(910,272)
|
$
|
5,226,517
|
|
|
|
|
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Amounts attributable to common shareholders'
|
|
|
|
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Basic income (loss) per share
|
$
|
(0.24)
|
$
|
1.36
|
|
|
|
|
|
Diluted income (loss) per share
|
$
|
(0.24)
|
$
|
1.36
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
3,796,527
|
|
3,837,081
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
3,796,527
|
|
3,837,081
|
UTG, Inc.
|
|||||
|
|||||
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||
|
|
|
March 31,
|
|
March 31,
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
$
|
(764,191)
|
$
|
5,499,731
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during period
|
|
(23,750)
|
|
11,505,135
|
|
Less reclassification adjustment for gains included in net income
|
|
(59,366)
|
|
(5,101,860)
|
|
Subtotal: Other comprehensive income (loss), net of tax
|
|
(83,116)
|
|
6,403,275
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
(847,307)
|
|
11,903,006
|
|
|
|
|
|
|
|
Less comprehensive (income) loss attributable to noncontrolling interests
|
|
(146,081)
|
|
(273,214)
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to UTG, Inc.
|
$
|
(993,388)
|
$
|
11,629,792
|
UTG, Inc.
|
||||||
|
||||||
|
|
|
|
|
||
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
||||||
|
|
|
|
|
||
|
|
Three Months Ended
|
||||
|
|
March 31,
|
|
March 31,
|
||
|
|
2013
|
|
2012
|
||
|
|
|
|
|
||
Cash flows from operating activities:
|
|
|
|
|
||
Net income (loss) attributable to common shareholders
|
$
|
(910,272)
|
$
|
5,226,517
|
||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
||
Amortization (accretion) of investments
|
|
(403,748)
|
|
(975,910)
|
||
Realized investment gains, net
|
|
(44,723)
|
|
(7,135,970)
|
||
Unrealized trading gains (losses) included in income
|
|
297,344
|
|
(528,698)
|
||
Amortization of deferred policy acquisition costs
|
|
14,108
|
|
15,512
|
||
Amortization of cost of insurance acquired
|
|
266,088
|
|
286,375
|
||
Depreciation
|
|
320,071
|
|
446,177
|
||
Net income (loss) attributable to noncontrolling interest
|
|
146,081
|
|
273,214
|
||
Charges for mortality and administration of universal life and annuity products
|
|
(1,737,635)
|
|
(1,789,191)
|
||
Interest credited to account balances
|
|
1,450,681
|
|
1,422,593
|
||
Change in accrued investment income
|
|
350,518
|
|
(535,714)
|
||
Change in reinsurance receivables
|
|
927,606
|
|
718,638
|
||
Change in policy liabilities and accruals
|
|
(1,121,391)
|
|
(462,586)
|
||
Change in income taxes receivable (payable)
|
|
(1,982,692)
|
|
2,664,281
|
||
Change in other assets and liabilities, net
|
|
1,624,775
|
|
(1,245,683)
|
||
Net cash used in operating activities
|
|
(803,189)
|
|
(1,620,445)
|
||
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||
Proceeds from investments sold and matured:
|
|
|
|
|
||
Fixed maturities available for sale
|
|
6,173,142
|
|
49,673,705
|
||
Equity securities available for sale
|
|
0
|
|
296,399
|
||
Trading securities
|
|
17,829,177
|
|
3,863,825
|
||
Mortgage loans
|
|
7,785,104
|
|
2,430,247
|
||
Discounted mortgage loans
|
|
1,505,565
|
|
3,257,451
|
||
Real estate
|
|
2,733,460
|
|
8,173,899
|
||
Policy loans
|
|
997,774
|
|
1,134,602
|
||
Short term
|
|
29,383
|
|
0
|
||
Total proceeds from investments sold and matured
|
|
37,053,605
|
|
68,830,128
|
||
Cost of investments acquired:
|
|
|
|
|
||
Fixed maturities available for sale
|
|
(8,856,558)
|
|
(85,553,891)
|
||
Equity securities available for sale
|
|
(250,617)
|
|
(166,407)
|
||
Trading securities
|
|
(15,124,263)
|
|
(3,443,030)
|
||
Mortgage loans
|
|
(1,122,724)
|
|
(392)
|
||
Discounted mortgage loans
|
|
(1,280,456)
|
|
(5,875,374)
|
||
Real estate
|
|
(5,918,258)
|
|
(3,203,558)
|
||
Policy loans
|
|
(803,607)
|
|
(749,810)
|
||
Short term
|
|
(25,000)
|
|
0
|
||
Total cost of investments acquired
|
|
(33,381,483)
|
|
(98,992,462)
|
||
Net cash provided by (used in) investing activities
|
|
3,672,122
|
|
(30,162,334)
|
||
|
|
|
|
|
||
Cash flows from financing activities:
|
|
|
|
|
||
Policyholder contract deposits
|
|
1,521,403
|
|
1,617,272
|
||
Policyholder contract withdrawals
|
|
(1,360,777)
|
|
(1,638,400)
|
||
Proceeds from notes payable/line of credit
|
|
0
|
|
350,000
|
||
Payments of principal on notes payable/line of credit
|
|
(9,500)
|
|
(359,347)
|
||
Purchase of treasury stock
|
|
(54,048)
|
|
(433,177)
|
||
Distributions to minority interests of consolidated subsidiaries
|
|
0
|
|
(10,000)
|
||
Net cash provided by (used in) financing activities
|
|
97,078
|
|
(473,652)
|
||
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents
|
|
2,966,011
|
|
(32,256,431)
|
||
Cash and cash equivalents at beginning of period
|
|
23,321,246
|
|
82,925,675
|
||
Cash and cash equivalents at end of period
|
$
|
26,287,257
|
$
|
50,669,244
|
March 31, 2013
|
|
Original or Amortized
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated
Fair
Value
|
Investments available for sale:
|
|
|
|
|
|
|
|
|
Fixed maturities
|
|
|
|
|
|
|
|
|
U.S. Government and govt. agencies and authorities
|
$
|
38,428,537
|
$
|
5,454,621
|
$
|
(281)
|
$
|
43,882,877
|
States, municipalities and political subdivisions
|
|
150,000
|
|
5,993
|
|
0
|
|
155,993
|
U.S. special revenue and assessments
|
|
2,150,766
|
|
157,779
|
|
0
|
|
2,308,545
|
Collateralized mortgage obligations
|
|
1,780,601
|
|
158,444
|
|
0
|
|
1,939,045
|
Public utilities
|
|
399,903
|
|
61,207
|
|
0
|
|
461,110
|
All other corporate bonds
|
|
133,203,699
|
|
9,682,828
|
|
(1,787,643)
|
|
141,098,884
|
|
|
176,113,506
|
|
15,520,872
|
|
(1,787,924)
|
|
189,846,454
|
Equity securities
|
|
29,747,616
|
|
1,284,494
|
|
(496,936)
|
|
30,535,174
|
Total
|
$
|
205,861,122
|
$
|
16,805,366
|
$
|
(2,284,860)
|
$
|
220,381,628
|
December 31, 2012
|
|
Original or Amortized
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated
Fair
Value
|
Investments available for sale:
|
|
|
|
|
|
|
|
|
Fixed maturities
|
|
|
|
|
|
|
|
|
U.S. Government and govt. agencies and authorities
|
$
|
33,430,165
|
$
|
5,457,009
|
$
|
0
|
$
|
38,887,174
|
States, municipalities and political subdivisions
|
|
160,000
|
|
6,637
|
|
0
|
|
166,637
|
U.S. special revenue and assessments
|
|
2,150,070
|
|
153,545
|
|
0
|
|
2,303,615
|
Collateralized mortgage obligations
|
|
2,241,384
|
|
183,409
|
|
(8)
|
|
2,424,785
|
Public utilities
|
|
399,900
|
|
63,662
|
|
0
|
|
463,562
|
All other corporate bonds
|
|
135,145,198
|
|
9,747,565
|
|
(1,811,251)
|
|
143,081,512
|
|
|
173,526,717
|
|
15,611,827
|
|
(1,811,259)
|
|
187,327,285
|
Equity securities
|
|
29,497,001
|
|
1,303,328
|
|
(295,415)
|
|
30,504,914
|
Total
|
$
|
203,023,718
|
$
|
16,915,155
|
$
|
(2,106,674)
|
$
|
217,832,199
|
Fixed Maturities Available for Sale
March 31, 2013
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
|
|
|
|
Due in one year or less
|
$
|
2,400,052
|
$
|
2,423,382
|
Due after one year through five years
|
|
30,181,928
|
|
32,745,345
|
Due after five years through ten years
|
|
108,860,492
|
|
117,999,294
|
Due after ten years
|
|
32,703,905
|
|
34,549,122
|
Collateralized mortgage obligations
|
|
1,967,129
|
|
2,129,311
|
Total
|
$
|
176,113,506
|
$
|
189,846,454
|
March 31, 2013
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
Unrealized losses
|
|
Fair value
|
Unrealized losses
|
|
Fair value
|
Unrealized losses
|
U.S. Government and govt. agencies and authorities
|
$
|
4,995,703
|
(282)
|
$
|
0
|
0
|
$
|
4,995,703
|
(282)
|
All other corporate bonds
|
|
6,638,079
|
(50,703)
|
|
4,383,021
|
(1,736,939)
|
|
11,021,100
|
(1,787,642)
|
Total fixed maturities
|
$
|
11,633,782
|
(50,985)
|
$
|
4,383,021
|
(1,736,939)
|
$
|
16,016,803
|
(1,787,924)
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
1,253,075
|
(496,936)
|
$
|
0
|
0
|
$
|
1,253,075
|
(496,936)
|
December 31, 2012
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
Unrealized losses
|
|
Fair value
|
Unrealized losses
|
|
Fair value
|
Unrealized losses
|
Collateralized mortgage obligations
|
$
|
4,513
|
(8)
|
$
|
0
|
0
|
$
|
4,513
|
(8)
|
All other corporate bonds
|
|
13,776,705
|
(245,846)
|
|
385,823
|
(1,565,405)
|
|
14,162,528
|
(1,811,251)
|
Total fixed maturities
|
$
|
13,781,218
|
(245,854)
|
$
|
385,823
|
(1,565,405)
|
$
|
14,167,041
|
(1,811,259)
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
594,081
|
(295,415)
|
$
|
0
|
0
|
$
|
594,081
|
(295,415)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
As of March 31, 2013
|
|
|
|
|
|
Fixed maturities
|
8
|
|
4
|
|
12
|
Equity securities
|
4
|
|
0
|
|
4
|
As of December 31, 2012
|
|
|
|
|
|
Fixed maturities
|
8
|
|
3
|
|
11
|
Equity securities
|
9
|
|
0
|
|
9
|
|
|
Three Months Ended
|
||
|
|
March 31,
|
||
|
|
2013
|
|
2012
|
|
|
|
|
|
Other than temporary impairments:
|
|
|
|
|
Real Estate
|
$
|
26,926
|
$
|
0
|
|
|
|
|
|
|
|
Three Months Ended
|
||
|
|
March 31,
|
||
|
|
2013
|
|
2012
|
|
|
|
|
|
Net unrealized losses
|
$
|
(297,344)
|
$
|
528,698
|
Net realized gains (losses)
|
|
86,271
|
|
2,310,507
|
Net unrealized and realized gains (losses)
|
$
|
(211,073)
|
$
|
2,839,205
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Fixed Maturities, available for sale
|
$
|
25,989,101
|
$
|
163,520,634
|
$
|
336,719
|
$
|
189,846,454
|
Equity Securities, available for sale
|
|
1,627,505
|
|
5,967,525
|
|
22,940,144
|
|
30,535,174
|
Trading Securities
|
|
6,426,288
|
|
0
|
|
0
|
|
6,426,288
|
Total
|
$
|
34,042,894
|
$
|
169,488,159
|
$
|
23,276,863
|
$
|
226,807,916
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trading Securities
|
$
|
2,950,631
|
$
|
0
|
$
|
0
|
$
|
2,950,631
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Fixed Maturities, available for sale
|
$
|
20,993,398
|
$
|
166,060,160
|
$
|
273,727
|
$
|
187,327,285
|
Equity Securities, available for sale
|
|
1,448,585
|
|
6,092,614
|
|
22,963,715
|
|
30,504,914
|
Trading Securities
|
|
13,903,148
|
|
115,312
|
|
0
|
|
14,018,460
|
Total
|
$
|
36,345,131
|
$
|
172,268,086
|
$
|
23,237,442
|
$
|
231,850,659
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trading Securities
|
$
|
7,552,704
|
$
|
0
|
$
|
0
|
$
|
7,552,704
|
|
|
Fixed Maturities,
Available for Sale
|
|
Equity Securities,
Available for Sale
|
|
Total
|
Balance at December 31, 2012
|
$
|
273,727
|
$
|
22,963,715
|
$
|
23,237,442
|
Total unrealized gain or losses:
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
62,992
|
|
(23,571)
|
|
39,421
|
Purchases
|
|
0
|
|
0
|
|
0
|
Balance at March 31, 2013
|
$
|
336,719
|
$
|
22,940,144
|
$
|
23,276,863
|
|
|
March 31, 2013
|
|
December 31, 2012
|
||||
Assets
|
|
Carrying
Amount
|
|
Estimated
Fair
Value
|
|
Carrying
Amount
|
|
Estimated
Fair
Value
|
Mortgage loans on real estate
|
$
|
11,009,174
|
$
|
11,089,516
|
$
|
17,671,554
|
$
|
17,803,159
|
Discounted mortgage loans
|
|
26,703,552
|
|
26,703,552
|
|
26,336,953
|
|
26,336,953
|
Investment real estate
|
|
71,025,034
|
|
71,025,034
|
|
68,165,013
|
|
68,165,013
|
Policy loans
|
|
12,397,405
|
|
12,397,405
|
|
12,591,572
|
|
12,591,572
|
Cash and cash equivalents
|
|
26,287,257
|
|
26,287,257
|
|
23,321,246
|
|
23,321,246
|
Short term investments
|
|
6,263,937
|
|
6,263,937
|
|
6,268,320
|
|
6,268,320
|
Liabilities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
18,848,454
|
|
18,848,454
|
|
18,857,954
|
|
18,857,954
|
|
|
|
|
Outstanding Principal Balance
|
||
Instrument
|
Issue
Date
|
Maturity Date
|
|
March 31, 2013
|
|
December 31, 2012
|
Promissory Note:
|
|
|
|
|
|
|
HPG Acquisitions
|
2007-02-07
|
2017-11-07
|
$
|
193,419
|
$
|
202,919
|
HPG Acquisitions
|
2012-12-27
|
2018-03-04
|
|
12,000,000
|
|
12,000,000
|
Instrument
|
Issue Date
|
Maturity Date
|
|
Revolving Credit Limit
|
|
December 31, 2012
|
Borrowings
|
Repayments
|
|
March 31, 2013
|
Lines of Credit:
|
|
|
|
|
|
|
|
|
|
|
UTG
|
2012-11-20
|
2013-11-20
|
$
|
8,000,000
|
$
|
1,655,035
|
0
|
0
|
$
|
1,655,035
|
UTG Avalon
|
2011-12-28
|
2014-01-03
|
|
5,000,000
|
|
5,000,000
|
0
|
5,000,000
|
|
0
|
UTG Avalon
|
2013-03-28
|
2014-03-28
|
|
5,000,000
|
|
0
|
5,000,000
|
0
|
|
5,000,000
|
UG
|
2010-12-28
|
2013-12-06
|
|
15,000,000
|
|
0
|
0
|
0
|
|
0
|
Year
|
|
Amount
|
|
|
|
2013
|
$
|
1,677,120
|
2014
|
|
5,034,154
|
2015
|
|
382,395
|
2016
|
|
518,134
|
2017
|
|
542,470
|
|
|
Total Funding
|
|
Unfunded
|
|
|
Commitment
|
|
Commitment
|
RLF III, LLC
|
$
|
4,000,000
|
$
|
398,120
|
Llano Music, LLC
|
|
2,000,000
|
|
571,000
|
Marcellus III, LLP
|
|
1,250,000
|
|
294,375
|
Dew Learning, LLC
|
|
1,000,000
|
|
528,114
|
Marcellus HBPI, LLP
|
|
1,800,000
|
|
771,300
|
PBEX, LLC
|
|
5,625,000
|
|
2,818,750
|
Sovereign's Capital, LP
|
|
500,000
|
|
250,000
|
|
|
Three Months Ended
|
||
|
|
March 31,
|
||
|
|
2013
|
|
2012
|
|
|
|
|
|
Interest expense
|
$
|
16,398
|
$
|
15,214
|
Federal income tax
|
|
2,050,000
|
|
22,581
|
*10.22
|
Promissory Note dated March 28, 2013 between UTG Avalon, LLC and First Southern Funding
|
*31.1
|
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as
required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*31.2
|
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*32.1
|
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*32.2
|
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
**101
|
Interactive Data File
|
Date:
|
May 10, 2013
|
|
By
|
/s/ James P. Rousey
|
|
|
|
|
James P. Rousey
|
|
|
|
|
President and Director
|
Date:
|
May 10, 2013
|
|
By
|
/s/ Theodore C. Miller
|
|
|
|
|
Theodore C. Miller
|
|
|
|
|
Senior Vice President
|
|
|
|
|
and Chief Financial Officer
|
Exhibit Number
|
Description
|
*10.22
|
Promissory Note dated March 28, 2013 between UTG Avalon, LLC and First Southern Funding
|
*31.1
|
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as
required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*31.2
|
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*32.1
|
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*32.2
|
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
**101
|
Interactive Data File
|
UTG Avalon, LLC
PO Box 5147
Springfield IL 62703
BORROWER'S NAME AND ADDRESS
"I" includes each borrower above, jointly and severally.
|
First Southern Funding
99 Lancaster Street
Stanford, KY 40484
LENDER'S NAME AND ADDRESS
"You" means the lender, its successors and assigns.
|
Loan Number _6206-0001_____
Date 3/28/2013_____________
Maturity Date 03/28/2014_____
Loan Amount $ 5,000,000.00___
Renewal Of _________________
|
o
|
Single Advance: I will receive all of this principal sum on N/A__________. No additional advances are contemplated under this note.
|
|||
x
|
Multiple Advance: The principal sum shown above is the maximum amount of principal I can borrow under this note. On 3/28/2013_____
________ I will receive the amount of $ 5,000,000.00_____ and future principal advances are contemplated.
|
|||
|
Conditions: The conditions for future advances are _______________________________________________________________________
A. Only upon such terms and under such conditions as you may deem appropriate at the time each advance is requested.______________
_________________________________________________________________________________________________________________
x Open End Credit: You and I agree that I may borrow up to the maximum principal sum more than one time. This feature is subject to all other conditions and expires on __03/28/2014_________________________.
o Closed End Credit: You and I agree that I may borrow (subject to all other conditions) up to the maximum principal sum only one time.
|
|||
INTEREST: I agree to pay interest on the outstanding principal balance from __3/28/2013________________ at the rate of __4.000000__ %
|
||||
|
per year until _the rate changes as provided for in the note_______________.
|
|||
x
|
Variable Rate: This rate may then change as stated below.
|
|||
|
x Index Rate: The future rate will be ___.500000___Above________________ the following index rate:____________________________
the lowest of the U.S. Prime Rates as published in the money section of the Wall Street Journal_________________________________________________________________________________________________________
|
|||
|
o No Index: The future rate will not be subject to any internal or external index. It will be entirely in your control.
x Frequency and Timing: The rate on this note may change as often as __monthly_____________________________________________.
|
|||
|
A change in the interest rate will take effect _1st day of month following rate change_____________________________________.
|
|||
|
x Limitations: During the term of this loan, the applicable annual interest rate will not be more than ________21.000000_ % or less than
|
|||
|
_______4.000000 %. The rate may not change more than ________________________ % each __________________________________.
|
|||
|
Effect of Variable Rate: A change in the interest rate will have the following effect on the payments:
|
|||
|
x The amount of each scheduled payment will change.
|
o The amount of the final payment will change.
|
||
|
o _N/A__________________________________________________________________________________________________________.
|
|||
ACCRUAL METHOD: Interest will be calculated on a _Actual/Actual____________ basis.
|
||||
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below:
|
||||
|
oon the same fixed or variable rate basis in effect before maturity (as indicated above).
x at a rate equal to _4% in excess of the interest rate stated above that applied before maturity_________________________________.
|
|||
x LATE CHARGE: If a payment is made more than _15___ days after it is due, I agree to pay a late charge of __5% of the payment__________.
|
||||
|
|
|||
x ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which o are x are not included in the principal amount
|
||||
|
above: _Loan Fee__________________________________________________________________________________________________.
|
|||
PAYMENTS: I agree to pay this note as follows:
|
||||
x
|
Interest: I agree to pay accrued interest _2 Semiannually Payment(s) beginning 09-28-2013_______________________________________
_________________________________________________________________________________________________________________
|
|||
x
|
Principal: I agree to pay the principal __03-28-2014_______________________________________________________________________
_________________________________________________________________________________________________________________
|
|||
o
|
Installments: I agree to pay this note in ___________ payments. The first payment will be in the amount of $ _______________________
and will be due __________________________________. A payment of $ _____________________ will be due _____________________
______________________________________________________________________________ thereafter. The final payment of the entire
unpaid balance of principal and interest will be due ____________________________________________________.
|
|||
o
|
Unpaid Interest: Any accrued interest not paid when due (whether due by reason of a schedule of payments or due because of Lender's demand) will become part of the principal thereafter, and will bear interest at the interest rate in effect from time to time as provided for in this agreement.
|
|||
PURPOSE: The purpose of this loan is _Line of Credit__________________________________________________________________________.
|
||||
ADDITIONAL TERMS:
|
||||
|
This loan has a demand feature, however, if no demand is made, the loan is payable according to the terms specified under "Payments" above.
|
SECURITY INTEREST: I give you a security interest in all of the Property described below that I own or have sufficient rights in which to transfer an
|
||
|
interest, now or in the future, wherever the Property is or will be located, and all proceeds and products of the Property. "Property" includes all parts, accessories, repairs, replacements, improvements, and accessions to the Property; any original evidence of title or ownership; and all obligations that support the payment or performance of the Property. "Proceeds" includes anything acquired upon the sale, lease, license, exchange, or other disposition of the Property; any rights and claims arising from the Property; and any collections and distributions on account of the Property.
|
|
|
o
|
Accounts and Other Rights to Payment: All rights to payment, whether or not earned by performance, including, but not limited to, payment for property or services sold, leased, rented, licensed, or assigned. This includes any rights and interests (including all liens) which I have by law or agreement against any account debtor or obligor.
|
|
o
|
Inventory: All inventory held for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in my business.
|
|
o
|
Equipment: All equipment including, but not limited to machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment, shop equipment, office and record keeping equipment, parts, and tools. The Property includes any equipment described in a list or schedule I give to you, but such a list is not necessary to create a valid security interest in all of my equipment.
|
|
o
|
Instruments and Chattel Paper: All instruments, including negotiable instruments and promissory notes and any other writings or records that evidence the right to payment of a monetary obligation, and tangible and electronic chattel paper.
|
|
o
|
General Intangibles: All general intangibles including, but not limited to, tax refunds, patents and applications for patents, copyrights, trademarks, trade secrets, goodwill, trade names, customer lists, permits and franchises, payment intangibles, computer programs and all supporting information provided in connection with a transaction relating to computer programs, and the right to use my name.
|
|
o
|
Documents: All documents of title including, but not limited to, bills of lading, dock warrants and receipts, and warehouse receipts.
|
|
o
|
Farm Products and Supplies: All farm products including, but not limited to, all poultry and livestock and their young, along with their produce, products, and replacements; all crops, annual or perennial, and all products of the crops; and all feed, seed, fertilizer, medicines, and other supplies used or produced in my farming operations.
|
|
o
|
Government Payments and Programs: All payments, accounts, general intangibles, and benefits including, but not limited to, payments in kind, deficiency payments, letters of entitlement, warehouse receipts, storage payments, emergency assistance and diversion payments, production flexibility contracts, and conservation reserve payments under any preexisting, current, or future federal or state government program.
|
|
o
|
Investment Property: All investment property including, but not limited to, certificated securities, uncertificated securities, securities entitlements, securities accounts, commodity contracts, commodity accounts, and financial assets.
|
|
o
|
Deposit Accounts: All deposit accounts including, but not limited to, demand, time, savings, passbook, and similar accounts.
|
|
o
|
Specific Property Description: The Property includes, but is not limited by, the following:
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If this agreement covers timber to be cut, enter real estate description and record owner information:_____________________________________________
_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
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The Property will be used for a o personal o business o agricultural o ________________________________________________________purpose.
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Borrower/Owner State of organization/registration (if applicabale)__________________________________________________________________________
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Any person who signs within this box does so to give you a security interest in the Property described on this page. This person does not promise to pay the note. "I" as used in this security agreement will include the borrower and any person who signs within this box.
Date ___________________________
Signed ______________________________________________________________
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"Right to receive money from you" means:
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(1)
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any deposit account balance I have with you;
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(2)
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any money owed to me on an item presented to you or in your possession for collection or exchange; and
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(3)
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any repurchase agreement or other nondeposit obligation
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(1)
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You may demand immediate payment of all I owe you under this note (principal, accrued unpaid interest and other accrued unpaid charges).
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(2)
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You may set off this debt against any right I have to the payment of money from you, subject to the terms of the "SET-OFF" paragraph herein.
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(3)
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You may demand security, additional security, or additional parties to be obligated to pay this note as a condition for not using any other remedy.
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(4)
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You may refuse to make advances to me or allow purchases on credit by me.
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(5)
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You may use any remedy you have under state or federal law.
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(6)
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You may make use of any remedy given to you in any agreement securing this note.
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(1)
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demand payment of amounts due (presentment);
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(2)
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obtain official certification of nonpayment (protest); or
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(3)
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give notice that amounts due have not been paid (notice of dishonor).
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/s/ Theodore C. Miller
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/s/ James P. Rousey
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Theodore C. Miller, Manager
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James P. Rousey, Authorized Signer
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SIGNATAURE FOR LENDER:
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/s/ Jill Martin, Secretary & Manager, First Southern Funding, LLC
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UTG Avalon, LLC
PO Box 5147
Springfield IL 62703
BORROWER'S NAME AND ADDRESS
"I" includes each borrower above, jointly and severally.
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First Southern Funding
99 Lancaster Street
Stanford, KY 40484
LENDER'S NAME AND ADDRESS
"You" means the lender, its successors and assigns.
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Line of Credit No. _6206-0001 ____
Date 3/28/2013________________
Max. Credit Amt. $ 5,000,000.00__
Loan Ref. No. _________________
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1.
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AMOUNT: This line of credit is:
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a.
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I have borrowed the maximum amount available to me;
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b.
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This line of credit has expired;
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c.
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I have defaulted on the note (or notes) which show my indebtedness under this line of credit;
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d.
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I have violated any term of this line of credit or any note or other agreement entered into in connection with this line of credit;
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e.
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I have suffered any deterioration in my financial condition as believed or determined by you, in your sole discretion, on the basis of such information as may be available to you from time to time.___________________________________________________________________
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2.
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PROMISSORY NOTE: I will repay any advances made according to this line of credit agreement as set out in the promissory note, I signed on originating this __agreement____, or any note(s) I sign at a later time which represent advances under this agreement. The note(s) set(s) out the terms relating to maturity, interest rate, repayment and advances. If indicated on the promissory note, the advances will be made as follows:
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3.
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RELATED DOCUMENTS: I have signed the following documents in connection with this line of credit and note(s) entered into in accordance with this line of credit:
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4.
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REMEDIES: If I am in default on the note(s) you may:
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a.
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take any action as provided in the related documents;
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b.
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without notice to me, terminate this line of credit.
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5.
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COSTS AND FEES: If you hire an attorney to enforce this agreement I will pay your reasonable attorney's fees, where permitted by law. I will also pay your court costs and costs of collection, where permitted by law.
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6.
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COVENANTS: For as long as this line of credit is in effect or I owe you money for advances made in accordance with the line of credit, I will do the following:
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a.
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maintain books and records of my operation relating to the need for this line of credit;
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b.
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permit you or any of your representatives to inspect and /or copy these records;
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c.
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provide to you any documentation requested by you which support the reason for making any advance under this line of credit;
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d.
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permit you to make any advance payable to the seller (or seller and me) of any items being purchased with that advance;
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e.
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__use all funds advanced under this line of credit for the following and no other purpose(s):_______________________________________________
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7.
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NOTICES: All notices or other correspondence with me should be sent to my address stated above. The notice or correspondence shall be effective when deposited in the mail, first class, or delivered to me in person.
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8.
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MISCELLANEOUS: This line of credit may not be changed except by a written agreement signed by you and me. The law of the state in which you are located will govern this agreement. Any term of this agreement which is contrary to applicable law will not be effective, unless the law permits you and me to agree to such a variation.
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FOR THE LENDER
/s/ Jill Martin
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SIGNATURES: I AGREE TO THE TERMS OF THIS LINE OF CREDIT. I HAVE RECEIVED A COPY ON TODAY'S DATE.
/s/ Theodore C. Miller
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Title
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Secretary & Manager, First Southern Funding, LLC
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Theodore C. Miller, Manager
/s/ James P. Rousey
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James P. Rousey, Authorized Signer
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CERTIFICATIONS
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I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of UTG, Inc., certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of the registrant, UTG, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
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Date:
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May 10, 2013
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By
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/s/ Jesse T. Correll
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Chairman of the Board and
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Chief Executive Officer
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CERTIFICATIONS
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|||||||
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|||||||
I, Theodore C. Miller, Senior Vice President, Corporate Secretary and Chief Financial Officer of UTG, Inc., certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of the registrant, UTG, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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|||||
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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||||
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
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Date:
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May 10, 2013
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By
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/s/ Theodore C. Miller
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Senior Vice President, Corporate Secretary and
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Chief Financial Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company
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Date:
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May 10, 2013
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By:
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/s/ Jesse T. Correll
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Jesse T. Correll
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Chairman of the Board and
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Chief Executive Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company
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Date:
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May 10, 2013
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By:
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/s/ Theodore C. Miller
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Theodore C. Miller
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Senior Vice President, Corporate
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Secretary and Chief Financial Officer
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SHAREHOLDERS' EQUITY (Details) (USD $)
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3 Months Ended |
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Mar. 31, 2013
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STOCK REPURCHASE PROGRAM [Abstract] | |
Stock repurchase program authorized amount | $ 6,000,000 |
Treasury Stock, Shares, Acquired | 4,143 |
Amount paid to repurchase shares during the year | 54,048 |
Amount of common stock repurchased | $ 4,665,744 |
Number of common stock acquired (in shares) | 566,833 |
INVESTMENTS
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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INVESTMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | Note 3 – Investments Available for Sale Securities – Fixed Maturity and Equity Securities The Company's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment. Investments in available for sale securities are summarized as follows:
The amortized cost and estimated market value of debt securities at March 31, 2013, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The fair value of investments with sustained gross unrealized losses at March 31, 2013 and December 31, 2012 are as follows:
Additional information regarding investments in an unrealized loss position is as follows:
Substantially all of the unrealized losses on fixed maturities available for sale at March 31, 2013 and December 31, 2012 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized losses on equity investments were primarily attributable to normal market fluctuations. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of March 31, 2013 and December 31, 2012. The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary. The factors considered by management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support, whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates. If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations. Equity securities may experience other-than-temporary impairments in the future based on the prospects for full recovery in value in a reasonable period of time and the Company's ability and intent to hold the security to recovery. If a decline in fair value is judged by management to be other-than-temporary or management does not have the intent or ability to hold a security, a loss is recognized by a charge to other-than-temporary impairment losses in the Condensed Consolidated Statements of Operations. Based on management's review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Condensed Consolidated Statements of Operations:
The other-than-temporary impairment recognized during 2013 was due to Management's assessment of the value of the real estate. The real estate was written down to better reflect current expected market value. Trading Securities Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations. Trading securities include exchange-traded equities and exchange-traded options. Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale. The fair value of derivatives included in trading security assets and trading security liabilities as of March 31, 2013 was $1,324,513 and $(1,442,933), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2012 was $6,745,528 and $(6,050,344), respectively. Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only. Trading revenue charged to net investment income from trading securities was:
Mortgage Loans As of March 31, 2013 and December 31, 2012, the Company's mortgage loan portfolio contained 58 and 71 mortgage loans, including discounted mortgage loans, with a carrying value of $37,712,726 and $44,008,507, respectively. Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers' ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Given the uncertainty of the current market, management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held. Discount accruals reported during 2012 and 2013 were the result of the loan basis already being fully paid. On the remainder of the mortgage loan portfolio, interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. A mortgage loan reserve is established and adjusted based on management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The Company acquires the discounted mortgage loans at below fair value, therefore no reserve for delinquent loans is deemed necessary. Those loans not currently paying are being vigorously worked by management. The current discounted commercial mortgage loan portfolio has an average price of 37.3% of face value and management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased. |