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Investments
 9 Months Ended
Sep. 30, 2023
Investments [Abstract]  
Investments
Note 3 – Investments

Available for Sale Securities – Fixed Maturity 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:

September 30, 2023
  
Original or Amortized Cost
    
Gross Unrealized Gains
    
Gross Unrealized Losses
    
Fair Value
  
Investments available for sale:
                        
Fixed maturities
                        
U.S. Government and govt. agencies and authorities
  
$
16,317,458
    
$
0
    
$
(1,044,198
)
  
$
15,273,260
  
U.S. special revenue and assessments
    
7,530,519
      
0
      
(487,454
)
    
7,043,065
  
All other corporate bonds
    
89,360,347
      
37,216
      
(10,039,776
)
    
79,357,787
  
   
$
113,208,324
    
$
37,216
    
$
(11,571,428
)
  
$
101,674,112
  

December 31, 2022
  
Original or Amortized Cost
    
Gross Unrealized Gains
    
Gross Unrealized Losses
    
Fair Value
  
Investments available for sale:
                        
Fixed maturities
                        
U.S. Government and govt. agencies and authorities
  
$
18,315,321
    
$
0
    
$
(1,104,146
)
  
$
17,211,175
  
U.S. special revenue and assessments
    
7,535,018
      
0
      
(335,918
)
    
7,199,100
  
All other corporate bonds
    
91,429,481
      
65,529
      
(7,592,226
)
    
83,902,784
  
   
$
117,279,820
    
$
65,529
    
$
(9,032,290
)
  
$
108,313,059
  

The amortized cost and estimated market value of debt securities at September 30, 2023, 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.

Fixed Maturities Available for Sale
September 30, 2023
  
Amortized Cost
    
Fair Value
  
Due in one year or less
  
$
8,499,821
    
$
8,429,455
  
Due after one year through five years
    
51,497,869
      
48,657,990
  
Due after five years through ten years
    
4,182,082
      
3,988,524
  
Due after ten years
    
21,892,608
      
18,524,135
  
Fixed maturities with no single maturity date
    
27,135,944
      
22,074,008
  
Total
  
$
113,208,324
    
$
101,674,112
  

The fair value of investments with sustained gross unrealized losses are as follows:

September 30, 2023
  
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
  
$
1,476,590
      
(24,645
)
    
13,796,670
    
$
(1,019,553
)
    
15,273,260
    
$
(1,044,198
)
U.S. Special Revenue and Assessments
    
0
      
0
      
7,043,065
      
(487,454
)
    
7,043,065
      
(487,454
)
All other corporate bonds
    
7,585,524
      
(210,980
)
    
70,741,578
      
(9,828,796
)
    
78,327,102
      
(10,039,776
)
Total fixed maturities
  
$
9,062,114
      
(235,625
)
    
91,581,313
      
(11,335,803
)
    
100,643,427
    
$
(11,571,428
)

December 31, 2022
  
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
  
$
17,211,175
      
(1,104,146
)
    
0
    
$
0
      
17,211,175
    
$
(1,104,146
)
U.S. special revenue and assessments
    
7,199,100
      
(335,918
)
    
0
      
0
      
7,199,100
      
(335,918
)
All other corporate bonds
    
80,144,564
      
(7,592,226
)
    
0
      
0
      
80,144,564
      
(7,592,226
)
Total fixed maturities
  
$
104,554,839
      
(9,032,290
)
    
0
    
$
0
      
104,554,839
    
$
(9,032,290
)

Additional information regarding investments in an unrealized loss position is as follows:

  
Less than 12 months
    
12 months or longer
    
Total
  
As of September 30, 2023
                  
Fixed maturities
    
7
      
47
      
54
  
As of December 31, 2022
                        
Fixed maturities
    
57
      
0
      
57
  

Substantially all of the unrealized losses on fixed maturities at September 30, 2023 and December 31, 2022 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. Based upon Management’s review of the fixed maturity available-for-sale portfolio, an allowance for credit losses is not deemed necessary as of September 30, 2023.

There were no impairment losses recognized by the Company during the nine moths ended September 30, 2023. Management believes that the Company will fully recover its cost basis in the securities held as of September 30, 2023, and Management does not have the intent to sell nor is it more likely than not the Company will be required to sell such securities until they recover or mature.

Net unrealized losses included in other comprehensive income (loss) for investments classifies as available-for-sale, net of the effect of deferred income taxes, assuming that the depreciation had been realized as of  September 30, 2023 and December 31, 2022:

  
September 30, 2023
    
December 31, 2022
  
Unrealized appreciation (depreciation) on available-for-sale securities
  
$
(11,534,212
)
  
$
(8,996,761
)
Deferred income taxes
    
2,422,185
      
1,889,320
  
Net unrealized appreciation (depreciation) on available-for-sale securities
  
$
(9,112,027
)
  
$
(7,107,441
)


Net Investment Gains (Losses)

The following table presents net investment gains (losses) and the change in net unrealized gains (losses) on investments. 

  
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2023
    
2022
    
2023
    
2022
  
Realized gains:
                        
Sales of fixed maturities
  
$
12,500
    
$
0
    
$
58,333
    
$
4,683
  
Sales of equity securities
    
110,742
      
1,485,872
      
359,216
      
1,883,453
  
Sales of real estate
    
7,815,364
      
449,133
      
8,541,124
      
5,020,973
  
Sales of short-term investments
    
0
      
0
      
23,509
      
0
  
Total realized gains
    
7,938,606
      
1,935,005
      
8,982,182
      
6,909,109
  
Realized losses:
                                
Sales of fixed maturities
    
0
      
0
      
0
      
(5,210
)
Sales of equity securities
    
0
      
0
      
(7,966
)
    
(109,636
)
Sales of real estate
    
0
      
(34,547
)
    
0
      
(34,547
)
Sales of short-term investments
    
(374
)
    
0
      
(374
)
    
0
  
Total realized losses
    
(374
)
    
(34,547
)
    
(8,340
)
    
(149,393
)
Net realized investment gains (losses)
    
7,938,232
      
1,900,458
      
8,973,842
      
6,759,716
  
Change in fair value of equity securities:
                                
Change in fair value of equity securities held at the end of the period
    
(23,403
)
    
7,097,738
      
(7,209,399
)
    
14,462,029
  
Change in fair value of equity securities
    
(23,403
)
    
7,097,738
      
(7,209,399
)
    
14,462,029
  
Net investment gains (losses)
  
$
7,914,829
    
$
8,998,196
    
$
1,764,443
    
$
21,221,745
  
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income:
                                
Fixed maturities
  
$
(3,606,251
)
  
$
(7,122,856
)
  
$
(2,521,367
)
  
$
(23,436,431
)
Net increase (decrease)
  
$
(3,606,251
)
  
$
(7,122,856
)
  
$
(2,521,367
)
  
$
(23,436,431
)


Cost Method Investments

The Company held equity investments with an aggregate cost of $15,683,343 at September 30, 2023 and December 31, 2022.  These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management did not identify any events or changes in circumstances that might have a significant adverse effect on the reported value of those investments.  Based on Management’s evaluation of the expected cash flow of the investments, and the Company’s ability and intent to hold the investments for a reasonable period of time, the Company does not deem an other-than-temporary impairment necessary at September 30, 2023.

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 Consolidated Statements of Operations.  Trading Securities included exchange-traded equities and exchange-traded options.  Trading securities carried as liabilities were 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 September 30, 2023 was $0. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2022 was $0. 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:

  
Three Months Ended
  
   
September 30,
  
   
2023
    
2022
  
Net unrealized gains (losses)
  
$
0
    
$
0
  
Net realized gains (losses)
    
0
      
0
  
Net unrealized and realized gains (losses)
  
$
0
    
$
0
  

 
Nine Months Ended
  
   
September 30,
  
   
2023
    
2022
  
Net unrealized gains (losses)
  
$
0
    
$
0
  
Net realized gains (losses)
    
0
      
(13,283
)
Net unrealized and realized gains (losses)
  
$
0
    
$
(13,283
)

Mortgage Loans

The Company, from time to time, acquires mortgage loans through participation agreements with FSNB.  FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market.  The Company is able to receive participations from FSNB for three primary reasons:  1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB’s loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away.  For originated loans, the Company’s Management is responsible for the final approval of such loans after evaluation.  Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control.  These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity.  Once the loan is approved, the Company directly funds the loan to the borrower.  The Company bears all risk of loss associated with the terms of the mortgage with the borrower.

During the nine months ended September 30, 2023 and 2022, the Company acquired $2,050,124 and $1,755,496 in mortgage loans, respectively.  FSNB services the majority of the Company’s mortgage loan portfolio.  The Company pays FSNB a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During 2023 and 2022, the maximum and minimum lending rates for the mortgage loan portfolio were:

  
2023
    
2022
  
   
Maximum rate
    
Minimum rate
    
Maximum rate
    
Minimum rate
  
Farm Loans
    
5.00
%
    
5.00
%
    
5.00
%
    
4.50
%
Commercial Loans
    
8.75
%
    
4.00
%
    
7.00
%
    
4.00
%
Residential Loans
    
5.00
%
    
4.15
%
    
5.00
%
    
4.15
%

Most mortgage loans are first position loans.  Loans issued are generally limited to no more than 80% of the appraised value of the property.

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.  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.

The following is a summary of the mortgage loans outstanding and the related allowance for credit losses:

  
September 30, 2023
    
December 31, 2022
  
Farm
  
$
338,207
    
$
383,278
  
Commercial
    
14,610,583
      
30,102,775
  
Residential
    
206,897
      
212,641
  
Total mortgage loans
    
15,155,687
      
30,698,694
  
Less allowance for credit losses
    
(370,000
)
    
0
  
Total mortgage loans, net
  
$
14,785,687
    
$
30,698,694
  

There were no past due loans as of September 30, 2023 and December 31, 2022.

Notes Receivable

Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances.  Interest accruals are analyzed based on the likelihood of repayment.  The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. During the nine months ended September 30, 2023 and 2022 the Company acquired  $3,579,241 and $5,870,657 of notes receivable, respectively.
 
Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control.  Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party.

Similar to the mortgage loans, FSNB services the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note.  The Company has in place a monitoring system to provide Management with information regarding potential troubled loans.

The following is a summary of the notes receivable outstanding and the related allowance for credit losses:

  
September 30, 2023
    
December 31, 2022
  
Notes receivable
  
$
13,352,860
    
$
14,424,127
  
Less allowance for credit losses
    
(170,000
)
    
0
  
Total notes receivable, net
  
$
13,182,860
    
$
14,424,127
  

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when Management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance for credit losses represents Management's estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by Management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments - mortgage loans on real estate and notes receivable.

The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for risk tolerance, loan review and audit results, asset quality and portfolio trends, industry concentrations, external factors and economic conditions.

Loans that do not share risk characteristics are evaluated on an individual bases, When Management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate.

Allowance for Credit Losses - Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company's income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well a any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company's consolidated balance sheets.

Investment Real Estate

Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of 3 to 30 years. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. During the nine months ended September 30, 2023, no impairments were recognized on the investment real estate.

Note 4 - Fair Value Measurements of the Condensed Consolidated Financial Statements provides further information regarding the fair value of financial instruments that are not measured at fair value. The investment real estate owned by the Company is included in this portion of the Note 4 - Fair Value Measurements disclosure.

The following table provides an allocation of the Company’s investment real estate by type:

  
September 30, 2023
    
December 31, 2022
  
Raw land
  
$
7,471,926
    
$
11,634,472
  
Commercial
    
5,847,661
      
5,124,847
  
Residential
    
4,738,882
      
3,402,502
  
Land, minerals and royalty interests
    
13,550,749
      
14,772,531
  
Total investment real estate
  
$
31,609,218
    
$
34,934,352
  

The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of September 30, 2023 and December 31, 2022, investments in oil and gas royalties represented 43% and 42%, respectively, of the total investment real estate portfolio.  See Note 9 – Concentrations of Credit Risk of the Condensed Consolidated Financial Statements for additional information regarding the allocation of the oil and gas investment real estate holdings by industry type.

Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Condensed Consolidated Statements of Operations. During the nine months ended  September 30, 2023 and 2022, the Company acquired $4,115,151 and $4,236,603 of investment real estate, respectively.

Short-Term Investments

Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. The short-term investments consist of United States Treasury securities.

During 2023 and 2022, the Company acquired $29,300,034 and $0, respectively, in short-term investments.