What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 614 added, 505 removed, 1527 unchanged (42% of the section changed)

Financial Statements.

September 30 2022

December 31 2021

Fixed maturity securities, available for sale, at estimated fair value

(amortized cost of $ 276,404,869 and $ 236,303,310 for 2022 and 2021)

Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $ 340,262,502 and $ 236,303,310 for 2022 and 2021)

$ 320,806,385

$ 259,287,603

Equity securities at estimated fair value (cost of $ 9,730,028 and $ 8,275,772 for

2022 and 2021)

Mortgage loans held for investment (net of allowances for loan losses of $ 1,476,895

and $ 1,699,902 for 2022 and 2021)

Real estate held for investment (net of accumulated depreciation of $ 20,686,607

and $ 17,692,038 for 2022 and 2021)

Equity securities at estimated fair value (cost of $ 9,792,380 and $ 8,275,772 for 2022 and 2021)

Mortgage loans held for investment (net of allowances for loan losses of $ 1,675,015 and $ 1,699,902 for 2022 and 2021)

Real estate held for investment (net of accumulated depreciation of $ 22,293,450 and $ 17,692,038 for 2022 and 2021)

Real estate held for sale

Other investments and policy loans (net of allowances for doubtful accounts of $ 1,800,076

and $ 1,686,218 for 2022 and 2021)

Other investments and policy loans (net of allowances for doubtful accounts of $ 1,736,761 and $ 1,686,218 for 2022 and 2021)

Accrued investment income

4 unchanged sentences

Restricted assets (including $ 5,730,936 and $ 5,205,510 for 2022 and 2021 at estimated fair value)

Cemetery perpetual care trust investments (including $ 3,095,338 and $ 4,087,245 for 2022 and 2021 at

estimated fair value)

Cemetery perpetual care trust investments (including $ 3,440,102 and $ 4,087,245 for 2022 and 2021 at estimated fair value)

Receivable from reinsurers

9 unchanged sentences

CONSOLIDATED BALANCE SHEETS (Continued)

June 30 2022 (Unaudited)

September 30 2022

December 31 2021

18 unchanged sentences

40,000,000 shares authorized;

issued 18,678,688 shares in 2022

and 17,642,722 shares in 2021

issued 18,717,540 shares in 2022 and 17,642,722 shares in 2021

non-voting common stock - $ 1.00 par value;

3 unchanged sentences

6,000,000 shares authorized;

issued 2,928,711 shares

in 2022 and 2,866,565 shares in 2021

issued 2,889,859 shares in 2022 and 2,866,565 shares in 2021

Common stock, value

14 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

Mortgage fee income

$ 118,983,231

$ 204,414,276

Insurance premiums and other considerations

2 unchanged sentences

Gains (losses) on investments and other assets

( 2,178,952 )

( 2,921,372 )

Total revenues

11 unchanged sentences

Total benefits and expenses

Earnings before income taxes

Income tax expense

Earnings (loss) before income taxes

( 3,302,344 )

Income tax benefit (expense)

( 3,352,663 )

1 unchanged sentence

( 10,998,876 )

Net earnings per Class A Equivalent common share (1)

Net earnings per Class A Equivalent common share- assuming

Net earnings (loss)

$ ( 2,353,185 )

Net earnings (loss) per Class A Equivalent common share ( 1 ) (1)

Net earnings (loss) per Class A Equivalent common share-assuming

dilution ( 1 ) (1)

Weighted-average Class A equivalent common shares outstanding ( 1 ) (1)

Weighted-average Class A equivalent common shares outstanding-assuming dilution

(1) Net earnings per

share amounts have been adjusted retroactively for the effect of annual stock dividends.

The weighted-average shares outstanding includes

the weighted-average Class A common shares and the weighted-average Class C common shares determined on an equivalent Class A common

Net earnings per common share represent net earnings per equivalent Class A common share.

Net earnings (loss) per share amounts have been adjusted retroactively

for the effect of annual stock dividends.

The weighted-average shares outstanding includes the weighted-average Class A common shares

and the weighted-average Class C common shares determined on an equivalent Class A common stock basis.

Net earnings (loss) per common

share represent net earnings (loss) per equivalent Class A common share.

accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

Net earnings (loss)

$ ( 2,353,185 )

Other comprehensive income:

Unrealized gains (losses) on fixed maturity securities available for sale

Unrealized losses on fixed maturity securities available for sale

$ ( 13,523,240 )

1 unchanged sentence

( 41,845,274 )

( 3,477,826 )

Unrealized gains (losses) on restricted assets

1 unchanged sentence

Foreign currency translation adjustments

Other comprehensive gain (loss), before income tax

Other comprehensive loss, before income tax

( 13,467,249 )

1 unchanged sentence

( 41,957,626 )

Income tax benefit (expense)

Other comprehensive gain (loss), net of income tax

( 3,507,600 )

Income tax benefit

Other comprehensive loss, net of income tax

( 10,641,313 )

( 1,125,206 )

( 33,142,128 )

( 2,769,841 )

Comprehensive income (loss)

4 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Income (loss)

Six Months Ended June 30, 2022

Comprehensive

Income (loss)

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Nine Months Ended September 30, 2022

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2022

31 unchanged sentences

$ 280,485,055

Six Months Ended June 30, 2021

Comprehensive

Income (loss)

( 2,353,185 )

Other comprehensive loss

( 10,641,313 )

Stock-based compensation expense

Sale of treasury stock

Conversion Class C to Class A

September 30, 2022

$ ( 15,071,680 )

$ 180,919,986

$ ( 5,041,822 )

$ 268,861,877

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

Nine Months Ended September 30, 2021

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2021

14 unchanged sentences

$ 271,867,841

Beginning, Balance

$ 165,867,882

$ ( 1,111,464 )

$ 271,867,841

Other comprehensive income

10 unchanged sentences

$ 285,848,713

Beginning balance

$ 168,415,007

$ ( 2,207,608 )

$ 285,848,713

Net earnings (loss)

Other comprehensive loss

( 1,125,206 )

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

Stock dividends

Conversion Class C to Class A

September 30, 2021

$ 179,195,423

$ ( 1,127,442 )

$ 296,716,168

Ending balance

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30

Nine Months Ended September 30

Cash flows from operating activities:

1 unchanged sentence

$ 109,318,230

$ 128,890,897

Cash flows from investing activities:

5 unchanged sentences

( 3,591,283 )

( 1,382,227 )

Sales of equity securities

Net changes in restricted assets

( 1,157,021 )

Net changes in perpetual care trusts

32 unchanged sentences

( 41,176,509 )

Net change in cash, cash equivalents, restricted cash and restricted

cash equivalents

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning

Cash, cash equivalents, restricted cash and restricted cash

equivalents at end of period

Net change in cash, cash equivalents, restricted cash and restricted cash equivalents

( 47,193,065 )

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

$ 123,023,767

1 unchanged sentence

Cash paid during the year for:

Income taxes (net of refunds)

Non Cash Operating, Investing and Financing Activities:

Transfer of loans held for sale to mortgage loans held for investment

Benefit plans funded with treasury stock

2 unchanged sentences

Mortgage loans held for investment foreclosed into real estate held for investment

Transfer of loans held for sale to mortgage loans held for investment

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

flows is presented in the table below:

Six Months Ended June 30

Nine Months Ended September 30

Cash and cash equivalents

$ 111,498,676

$ 149,209,290

Restricted assets

2 unchanged sentences

$ 123,023,767

$ 160,052,237

Cash, cash equivalents,

restricted cash and restricted cash equivalents at end of period

$ 142,406,108

cash equivalents, restricted cash and restricted cash equivalents at end of period

$ 123,023,767

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION

Notes to Condensed Consolidated

Financial Statements June 30, 2022 (Unaudited)

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Basis of Presentation

9 unchanged sentences

considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2022 are

not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three and nine months ended September 30,

2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

22 unchanged sentences

COVID-19, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers,

The Company continues to closely monitor developments relating to the ongoing COVID-19 pandemic and assess its impact on

the Company’s business.

The continued uncertainty surrounding the COVID-19 pandemic has had and continues to have a significant

impact on the global economy and financial markets.

Governments and businesses have taken numerous measures to try to contain the virus

and its variants, which include the implementation of travel bans, self-imposed quarantine periods, social distancing, and various mask

and vaccine mandates.

These measures have disrupted and will continue to disrupt businesses globally.

Governments and central banks have

reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

Most monetary and fiscal interventions

have been significantly curtailed.

The Company continues to closely monitor developments relating to COVID-19 and assess its impact on the Company’s

The continued uncertainty surrounding COVID-19 has had and continues to have a significant impact on the global economy and

financial markets.

Governments and businesses have taken numerous measures to try to contain the virus and its variants, which include

the implementation of travel bans, self-imposed quarantine periods, social distancing, and various mask and vaccine mandates.

These measures

have disrupted and will continue to disrupt businesses globally.

Governments and central banks have reacted with significant monetary

and fiscal interventions designed to stabilize economic conditions.

Most monetary and fiscal interventions have been significantly curtailed.

most businesses, COVID-19 has impacted the Company, including the temporary adoption of work from home arrangements and a restructuring

5 unchanged sentences

results of operations, and cash flows.

To the extent the COVID-19 pandemic adversely affects the Company’s business, financial

condition, results of operations and cash flows, it may also have the effect of heightening many other risks to the Company.

These uncertainties

have the potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities

and individual borrowers with mortgage loans held by the Company.

To the extent COVID-19 adversely affects the Company’s business, financial condition, results

of operations and cash flows, it may also have the effect of heightening many other risks to the Company.

These uncertainties have the

potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities and individual

borrowers with mortgage loans held by the Company.

Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, including

7 unchanged sentences

“Financial Instruments – Credit Losses (Topic 326)” — Issued in September 2016, ASU 2016-13

amends guidance on reporting credit losses for assets held at amortized cost basis (such as mortgage loans and held to maturity debt

securities) and available for sale debt securities.

For assets held at amortized cost basis, Topic 326 eliminates the probable initial

recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present

the net amount expected to be collected.

For available for sale debt securities, credit losses should be measured in a manner similar

to current GAAP;

however, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down.

2019, the FASB proposed an update to ASU No.

2016-13 that would make the ASU effective for the Company on January 1, 2023.

is in the process of evaluating the potential impact of this standard.

amends guidance on reporting credit losses for assets held at amortized cost basis (such as mortgage loans held for investment and

held to maturity debt securities) and available for sale debt securities.

For assets held at amortized cost basis, Topic 326

eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current

estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized

cost basis of the financial assets to present the net amount expected to be collected.

For available for sale debt securities,

credit losses should be measured in a manner similar to current GAAP;

however, Topic 326 will require that credit losses be

presented as an allowance rather than as a write-down.

In October 2019, the FASB proposed an update to ASU No.

2016-13 that would

make the ASU effective for the Company on January 1, 2023.

The Company has evaluated the potential impact of this standard and

estimates that the allowance for credit losses will increase within a range of $ 500,000 to $ 750,000 for its residential mortgage

loans held for investment.

Upon adoption, on January 1, 2023, this will be an adjustment to the

opening balance of retained earnings in stockholders’ equity.

The Company is still evaluating the potential impact of

this standard for its commercial mortgage loans held for investment.

“Financial Services – Insurance (Topic 944):

15 unchanged sentences

30, 2022 (Unaudited)

Company’s investments as of June 30, 2022 are summarized as follows:

Company’s investments as of September 30, 2022 are summarized as follows:

Schedule of Investments

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

June 30, 2022:

Fixed maturity securities, available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Unrealized Gains

Unrealized Losses

September 30,

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Government agencies

$ ( 2,712,674 )

Obligations of states and political subdivisions

Corporate securities including public utilities

Obligations of states and

political subdivisions

Corporate securities including

public utilities

( 14,314,429 )

2 unchanged sentences

Redeemable preferred stock

Total fixed maturity securities available for sale

fixed maturity securities available for sale

$ 340,262,502

3 unchanged sentences

Common stock:

Industrial, miscellaneous and all other

Industrial, miscellaneous

and all other

$ ( 1,293,321 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 1,293,321 )

Mortgage loans held for investment at amortized cost:

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred loan fees, net

Unamortized deferred

loan fees, net

( 1,730,306 )

Allowance for loan losses

Allowance for loan

( 1,675,015 )

Net discounts

Total mortgage loans held for investment

Total mortgage loans

held for investment

$ 320,563,600

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

Real estate held for investment - net of

accumulated depreciation:

Total real estate

held for investment

$ 196,077,537

Real estate held for sale:

Total real estate held for sale

Other investments and policy loans at amortized cost:

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank stock (1)

Federal Home Loan Bank

Other investments

1 unchanged sentence

( 1,736,761 )

Total policy loans and other investments

Accrued investment income

Total policy loans and

other investments

Accrued investment

Total investments

7 unchanged sentences

Company’s investments as of December 31, 2021 are summarized as follows:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2021:

Fixed maturity securities, available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Mortgage-backed securities

Redeemable preferred stock

Total fixed maturity securities available for sale

fixed maturity securities available for sale

$ 236,303,310

3 unchanged sentences

Common stock:

Industrial, miscellaneous and all other

Industrial, miscellaneous

and all other

$ ( 305,802 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 305,802 )

Mortgage loans held for investment at amortized cost:

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred loan fees, net

Allowance for loan losses

Unamortized deferred

loan fees, net

Allowance for loan

( 1,699,902 )

Net discounts

Total mortgage loans held for investment

Total mortgage loans

held for investment

$ 277,306,046

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

Real estate held for investment - net of

accumulated depreciation:

Total real estate

held for investment

$ 197,365,797

Real estate held for sale:

Total real estate held for sale

Other investments and policy loans at amortized cost:

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank stock (1)

Federal Home Loan Bank

Other investments

1 unchanged sentence

( 1,686,218 )

Total policy loans and other investments

Accrued investment income

Total policy loans and

other investments

Accrued investment

Total investments

8 unchanged sentences

following table summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value

at June 30, 2022 and at December 31, 2021.

at September 30, 2022 and at December 31, 2021.

The unrealized losses were primarily related to interest rate fluctuations and uncertainties

relating to COVID-19.

The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

The table below sets forth unrealized losses by duration with the fair value of the related fixed maturity securities:

Schedule of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Combined Unrealized Loss

Combined Fair Value

At June 30, 2022

Treasury Securities And Obligations of U.S.

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

At September 30, 2022

Treasury Securities And Obligations

Government Agencies

1 unchanged sentence

Corporate Securities

Mortgage and other asset-backed securities

Mortgage and other asset-backed

$ 273,068,156

3 unchanged sentences

Corporate Securities

Mortgage and other asset-backed securities

were 508 securities with fair value of 95.2 % of aggregate amortized cost at June 30, 2022.

There were 55 securities with fair value of

97.3 % of aggregate amortized cost at December 31, 2021.

No additional credit losses have been recognized for the three and six months

ended June 30, 2022 and 2021, since the increase in unrealized losses is primarily a result of the recent rise in interest rates.

Mortgage and other asset-backed

were 703 securities with fair value of 93.1 % of aggregate amortized cost at September 30, 2022.

There were 55 securities with fair value

of 97.3 % of aggregate amortized cost at December 31, 2021.

No credit losses have been recognized for the three and nine months ended

September 30, 2022 and 2021, since the increase in unrealized losses is primarily a result of the recent rise in interest rates.

a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale.

18 unchanged sentences

the investments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

9 unchanged sentences

Securities due to an increase in expected cash flows

Balance of credit-related OTTI at June 30

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2022,

Balance of credit-related OTTI at September 30

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at September 30,

2022, by contractual maturity.

Expected maturities may differ from contractual maturities because certain borrowers may have the right to call

or prepay obligations with or without call or prepayment penalties.

Expected maturities may differ from contractual maturities because certain borrowers may have the right

to call or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual

Maturity Date

Estimated Fair

Due in 1 year

8 unchanged sentences

The Company had pledged a total of $ 86,320,358 ,

at estimated fair value, of fixed maturity securities with the FHLB at June 30, 2022.

These securities are used as collateral on any

cash borrowings from the FHLB.

As of June 30, 2022, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was

$ 51,524,955 .

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

at estimated fair value, of fixed maturity securities with the FHLB at September 30, 2022.

These securities are used as collateral on

any cash borrowings from the FHLB.

As of September 30, 2022, the Company owed nil to the FHLB and its estimated maximum borrowing capacity

was $ 83,051,896 .

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

Related Earnings

following table presents the net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities,

following table presents the realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities,

and other than temporary impairments from investments and other assets.

Schedule of Gain (Loss) on Investments

Three Months Ended

Nine Months Ended

Fixed maturity securities:

2 unchanged sentences

Equity securities:

Gains on securities sold

Gains (losses) on securities sold

Unrealized gains and (losses) on securities held at the end of the period

6 unchanged sentences

$ ( 2,921,372 )

net realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined

realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined

using the specific identification method.

1 unchanged sentence

Schedule of Major Categories of Net Investment Income

Three Months Ended

Nine Months Ended

Proceeds from sales

1 unchanged sentence

Gross realized losses

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

categories of net investment income were as follows:

Three Months Ended

Nine Months Ended

Fixed maturity securities available for sale

13 unchanged sentences

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 675,259 and $ 778,892 for the three

months ended June 30, 2022 and 2021, respectively, and of $ 1,207,243 and $ 351,879 for the six months ended June 30, 2022 and 2021, respectively.

months ended September 30, 2022 and 2021, respectively, and of $ 1,882,502 and $ 1,130,771 for the nine months ended September 30, 2022

and 2021, respectively.

investment income on real estate consists primarily of rental revenue.

1 unchanged sentence

expenses relating to investment activities.

on deposit with regulatory authorities as required by law amounted to $ 10,114,458 at June 30, 2022 and $ 10,168,853 at December 31, 2021

and cash on deposit with regulatory authorities as required by law amounted to $ 11,048,787 at September 30, 2022 and $ 10,168,853 at December

31, 2021 (the December 31, 2021 amount has been corrected from that previously reported due to a typographical error).

These restricted securities

are included in various assets under investments on the accompanying condensed consolidated balance sheets.

These restricted

securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on

equity securities and fixed maturity securities) at June 30, 2022, other than investments issued or guaranteed by the United States Government.

equity securities and fixed maturity securities) at September 30, 2022, other than investments issued or guaranteed by the United States

Estate Held for Investment and Held for Sale

15 unchanged sentences

and population and in assets that provide operational efficiencies.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

Company currently owns and operates 11 commercial properties in 5 states.

These properties include office buildings, flex office space,

and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah.

The Company uses

bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

Company currently owns and operates nine commercial properties in three states.

These properties include office buildings, flex office

space, and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah.

uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

aggregated net ending balance of commercial real estate that serves as collateral for bank loans was $ 133,785,749 and $ 134,251,205 as

of June 30, 2022 and December 31, 2021, respectively.

The associated bank loan carrying values totaled $ 100,503,091 and $ 85,663,148 as

of June 30, 2022 and December 31, 2021, respectively.

the three and six months ended June 30, 2022 and 2021, the Company did not record any impairment losses on commercial real estate held

for investment or held for sale.

Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed

consolidated statements of earnings.

of September 30, 2022 and December 31, 2021, respectively.

The associated bank loan carrying values totaled $ 97,562,264 and $ 85,663,148

as of September 30, 2022 and December 31, 2021, respectively.

the three months ended September 30, 2022 and 2021, the Company did not record any impairment losses on commercial real estate held for

investment or held for sale.

During the nine months ended September 30, 2022 and 2021, the Company recorded impairment losses on commercial

real estate held for sale of nil and $ 28,378 , respectively.

Impairment losses are included in gains (losses) on investment and other

assets on the condensed consolidated statements of earnings.

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

4 unchanged sentences

$ 150,105,948

Includes Center53 phase 1

$ 157,570,812

$ 155,393,335

(1) Includes Center53

phase 1 and phase 2

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

1 unchanged sentence

Total Square Footage

December 31 2021

Mississippi (1)

Approximately 93 acres of

undeveloped land

properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties

The Company expects these properties to sell within the coming 12 months.

Real Estate Held for Investment and Held for Sale

Company owns a small portfolio of residential homes primarily as a result of loan foreclosures.

The Company has the option to sell them

or to continue to hold them for cash flow and acceptable returns.

The Company also invests in residential subdivision land developments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

(1) Approximately 93

acres of undeveloped land

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

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

Real Estate Held for Investment and Held for Sale

Company occasionally owns a small portfolio of residential homes primarily as a result of loan foreclosures.

The Company has the option

to sell them or to continue to hold them for cash flow and acceptable returns.

The Company also invests in residential subdivision land

developments.

Company established Security National Real Estate Services (“SNRE”) to manage the residential portfolio.

SNRE cultivates

and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across

net ending balance of foreclosed residential real estate included in residential real estate held for sale was $ 200,962

and $ 1,190,602 as of June 30, 2022 and December 31, 2021, respectively.

the three months ended June 30, 2022 and 2021 the Company did not record any impairment losses on residential real estate held for sale

or held for investment.

During the six months ended June 30, 2022 and 2021 the Company recorded impairment losses on residential real

estate held for sale of $ 94,400 and nil , respectively.

Impairment losses are included in gains (losses) on investment and other assets

on the condensed consolidated statements of earnings.

and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the residential portfolio

across the country.

net ending balance of foreclosed residential real estate included in residential real estate held for sale was nil and $ 1,190,602 as

of September 30, 2022 and December 31, 2021, respectively.

the three months ended September 30, 2022 and 2021 the Company did not record any impairment losses on residential real estate held for

sale or held for investment.

During the nine months ended September 30, 2022 and 2021 the Company recorded impairment losses on residential

real estate held for sale of $ 94,400 and nil , respectively.

Impairment losses are included in gains (losses) on investment and other

assets on the condensed consolidated statements of earnings.

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

2 unchanged sentences

Washington (2)

Includes subdivision land

(1) Includes subdivision land developments

(2) Improved residential lots

4 unchanged sentences

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

December 31 2021

Net Ending Balance

December 31 2021

Real estate held for sale

properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties

The Company expects these properties to sell within the coming 12 months.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

1 unchanged sentence

primary business units of the Company occupy a portion of the real estate owned by the Company.

As of June 30, 2022, real estate owned

and occupied by the Company is summarized as follows:

As of September 30, 2022, real estate

owned and occupied by the Company is summarized as follows:

of Real Estate Owned and Occupied by the Company

3 unchanged sentences

433 West Ascension Way, Salt Lake City, UT - Center53 Building 2

Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations

Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales

1044 River Oaks Dr., Flowood, MS

8 unchanged sentences

Life Insurance Sales

Included in property and

equipment on the consolidated balance sheets

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

Loans Held for Investment

8 unchanged sentences

of its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors

At June 30, 2022, the Company had 79 % , 5 % , 4 % , 4 % , 2 % and 2 % of its mortgage loans from borrowers located in the states

of Utah, Florida, Texas, California, Nevada, and Arizona, respectively.

At September 30, 2022, the Company had 69 %, 8 %, 4 %, 4 %, 4 % and 3 % of its mortgage loans from borrowers located in the states

of Utah, Florida, Texas, California, Arizona, and Nevada, respectively.

At December 31, 2021, the Company had 70 %, 7 %, 5 %, 4 %, 4 % and

27 unchanged sentences

fair value is made, if necessary, and the amount is classified as real estate held for investment or held for sale.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

30 unchanged sentences

conditions, availability of long-term or construction financing, and interest rate sensitivity.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

5 unchanged sentences

Residential Construction

June 30, 2022

September 30, 2022

Allowance for credit losses:

Beginning balance - January 1, 2022

Ending balance - June 30, 2022

Ending balance - September 30, 2022

Ending balance:

3 unchanged sentences

Mortgage loans:

Ending balance - June 30, 2022

Ending balance - September 30, 2022

$ 201,685,076

24 unchanged sentences

$ 276,062,489 (1)

Amount corrected from that

previously reported due to a typographical error.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

(1) Amount corrected from that previously reported due to a typographical error.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

1 unchanged sentence

Schedule of Aging of Mortgage Loans

June 30, 2022

September 30, 2022

30-59 Days Past Due

9 unchanged sentences

( 1,132,024 )

( 1,730,306 )

Unamortized discounts, net

17 unchanged sentences

$ 277,306,046

Interest income is not recognized

on loans past due greater than 90 days or in foreclosure.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

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

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

6 unchanged sentences

of Impairment Mortgage Loans

June 30, 2022

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Interest Income Recognized

September 30, 2022

With no related allowance recorded:

9 unchanged sentences

Residential construction

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

3) Investments (Continued)

24 unchanged sentences

Accrual of interest resumes if a loan is brought current.

Interest not accrued on these loans totaled approximately $ 135,000 and $ 236,000 as of June 30, 2022 and December 31, 2021, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Loans Held for Sale

Interest not accrued on these loans totaled approximately $ 110,000 and $ 236,000 as of September 30, 2022 and December 31, 2021, respectively.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

Held for Sale

Company has elected the fair value option for loans held for sale.

6 unchanged sentences

Summary of Aggregate Fair Value - Loans Held for Sale

As of December 31

Aggregate fair value

7 unchanged sentences

Schedule of Mortgage Fee Income for Loans Held

Three Months Ended

Nine Months Ended

Interest income

2 unchanged sentences

( 3,271,282 )

Change in fair value of loans held for sale

( 2,843,155 )

Change in fair value of loans held for sale

( 4,131,363 )

5 unchanged sentences

$ 118,983,231

$ 204,414,276

a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party

11 unchanged sentences

to the investor.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

Loans Held for Sale (Continued)

loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:

Summary of Loan Loss Reserve Included in Other Liabilities and

Accrued Expenses

As of December

Balance, beginning of period

4 unchanged sentences

Balance, end of period

Included in mortgage fee

(1) Included in mortgage fee income

Company maintains reserves for estimated losses on current production volumes.

For the six months ended June 30, 2022, $ 598,922 in reserves

were added at a rate of 2.9 basis points per loan, the equivalent of $ 290 per $ 1,000,000 in loans originated.

This is a decrease over

the three months ended June 30, 2021, when reserves of $ 1,269,232 were added at a rate of 4.5 basis points per loan originated, the equivalent

of $ 450 per $ 1,000,000 in loans originated.

On February 1, 2021, SecurityNational Mortgage executed a settlement agreement with Lehman

Holdings in relation to two adversary proceedings wherein all mortgage loan related claims were resolved, thereby ending all liabilities

asserted by Lehman Holdings and conclusively ending all proceedings between SecurityNational Mortgage and Lehman Holdings.

The full amount

of SecurityNational Mortgage’s settlement payment was accounted for in the Company’s loan loss reserve as of December 31,

2020 and was paid during the first quarter 2021.The unique nature of COVID-19 creates significant difficulty for forecasting potential

future losses.

The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current

Thus, the Company believes that the final loan loss reserve as of June 30, 2022, represents its best estimate for adequate

loss reserves on loans sold.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Stock Compensation Plans

For the nine months ended September 30, 2022, $ 829,243

in reserves were added at a rate of 2.9 basis points per loan, the equivalent of $ 290 per $ 1,000,000 in loans originated.

This is a decrease

over the nine months ended September 30, 2021, when reserves of $ 1,701,700 were added at a rate of 3.0 basis points per loan originated,

the equivalent of $ 300 per $ 1,000,000 in loans originated.

In February 2021, SecurityNational Mortgage executed a settlement agreement

with Lehman Holdings in relation to two adversary proceedings wherein all mortgage loan related claims were resolved, thereby ending

all liabilities asserted by Lehman Holdings and conclusively ending all proceedings between SecurityNational Mortgage and Lehman Holdings.

The full amount of SecurityNational Mortgage’s settlement payment was accounted for in the Company’s loan loss reserve as

of December 31, 2020 and was paid during the first quarter 2021.The unique nature of COVID-19 creates significant difficulty for forecasting

potential future losses.

The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves

on current production.

Thus, the Company believes that the final loan loss reserve as of September 30, 2022, represents its best estimate

for adequate loss reserves on loans sold.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

Compensation Plans

Company has three fixed option plans (the “2013 Plan”, the “2014 Director Plan” and the “2022 Plan”).

Compensation expense for options issued of $ 220,175 and nil has been recognized for these plans for the three months ended June 30, 2022

and 2021, respectively, and $ 491,922 and $ 39,153 has been recognized for these plans for the six months ended June 30, 2022 and 2021,

respectively.

As of June 30, 2022, the total unrecognized compensation expense related to the options issued was $ 390,714 .

Compensation expense for options issued of $ 230,853 and nil has been recognized for these plans for the three months ended September

30, 2022 and 2021, respectively, and $ 722,775 and $ 39,153 has been recognized for these plans for the nine months ended September 30,

2022 and 2021, respectively.

As of September 30, 2022, the total unrecognized compensation expense related to the options issued was

fair value of each option granted is estimated on the date of grant using the Black Scholes Option Pricing Model.

5 unchanged sentences

the expected life of the options is based upon the Federal Reserve Board’s daily interest rates in effect at the time of the grant.

summary of the status of the Company’s stock compensation plans as of June 30, 2022, and the changes during the six months ended

June 30, 2022, are presented below:

summary of the status of the Company’s stock compensation plans as of September 30, 2022, and the changes during the nine months

ended September 30, 2022, are presented below:

Schedule of Activity of Stock Option Plans

Class A Shares

Weighted Average Exercise Price

Class C Shares

Weighted Average Exercise Price

Outstanding at January 1, 2022

Adjustment for effect of stock dividends

Outstanding at June 30, 2022

As of June 30, 2022:

Outstanding at September 30, 2022

As of September 30, 2022:

Options exercisable

As of June 30, 2022:

As of September 30, 2022:

Available options for future grant

Weighted average contractual term of options outstanding at June 30, 2022

Weighted average contractual term of options exercisable at June 30, 2022

Aggregated intrinsic value of options outstanding at June 30, 2022 (1)

Aggregated intrinsic value of options exercisable at June 30, 2022 (1)

The Company used a stock

price of $ 8.46 as of June 30, 2022 to derive intrinsic value.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Weighted average contractual term of

options outstanding at September 30, 2022

Weighted average contractual term of

options exercisable at September 30, 2022

intrinsic value of options outstanding at September 30, 2022 (1)

intrinsic value of options exercisable at September 30, 2022 (1)

(1) The Company used a stock price of $ 6.35 as of September 30, 2022 to derive intrinsic value.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

Stock Compensation Plans (Continued)

summary of the status of the Company’s stock compensation plans as of June 30, 2021, and the changes during the six months ended

June 30, 2021, are presented below:

Exercise Price

summary of the status of the Company’s stock compensation plans as of September 30, 2021, and the changes during the nine months

ended September 30, 2021, are presented below:

Class A Shares

Weighted Average Exercise Price

Class C Shares

Weighted Average Exercise Price

Outstanding at January 1, 2021

Adjustment for effect of stock dividends

Outstanding at June 30, 2021

As of June 30, 2021:

Outstanding at September 30, 2021

As of September 30, 2021:

Options exercisable

As of June 30, 2021:

As of September 30, 2021:

Available options for future grant

Weighted average contractual term of options outstanding at June 30, 2021

Weighted average contractual term of options exercisable at June 30, 2021

Aggregated intrinsic value of options

outstanding at June 30, 2021 (1)

Aggregated intrinsic value of options

exercisable at June 30, 2021 (1)

The Company used a stock

price of $ 8.33 as of June 30, 2021, which was the closing price of the Company’s Class A shares on Nasdaq for that day, to derive

intrinsic value.

Weighted average contractual term of options outstanding at

September 30, 2021

Weighted average contractual term of options exercisable at

September 30, 2021

Aggregated intrinsic value of

options outstanding at September 30, 2021 (1)

Aggregated intrinsic value of

options exercisable at September 30, 2021 (1)

(1) The Company used a stock price of $ 8.23 as of September 30, 2021, which was the closing price

of the Company’s Class A shares on Nasdaq for that day, to derive intrinsic value.

total intrinsic value (which is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on

the exercise date) of stock options exercised during the six months June 30, 2022 and 2021 was $ 521,527 and $ 434,318 , respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Earnings Per Share

per share amounts have been retroactively adjusted for the effect of annual stock dividends.

In accordance with GAAP, the basic and diluted

earnings per share amounts were calculated as follows:

the exercise date) of stock options exercised during the nine months September 30, 2022 and 2021 was $ 521,527 and $ 591,603 , respectively.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022 (Unaudited)

(loss) Per Share

(loss) per share amounts have been retroactively adjusted for the effect of annual stock dividends.

In accordance with GAAP, the basic

and diluted earnings (loss) per share amounts were calculated as follows:

Schedule of Earning Per Share, Basic and Diluted

Three Months Ended

Six Months Ended

Nine Months Ended

Net earnings (loss)

$ ( 2,353,185 )

Basic weighted-average shares outstanding

2 unchanged sentences

Diluted weighted-average shares outstanding

Basic net earnings per share

Diluted net earnings per share

the six months June 30, 2022 and 2021, there were 52,500 and nil anti-dilutive employee stock option shares, respectively, that were

not included in the computation of diluted net earnings per common share as their effect would be anti-dilutive.

Basic and diluted earnings

per share amounts are the same for each class of common stock.

Basic net earnings (loss) per share

Diluted net earnings (loss) per share

the nine months September 30, 2022 and 2021, there were 339,150 and nil anti-dilutive employee stock option shares, respectively, that

were not included in the computation of diluted net earnings per common share as their effect would be anti-dilutive.

Basic and diluted

earnings per share amounts are the same for each class of common stock.

following table summarizes the activity in shares of capital stock.

4 unchanged sentences

Conversion of Class C to Class A

Outstanding shares at June 30, 2021

Outstanding shares at September 30, 2021

Outstanding shares at December 31, 2021

2 unchanged sentences

Conversion of Class C to Class A

Outstanding shares at June 30, 2022

Outstanding shares at September 30, 2022

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

32 unchanged sentences

For the Three Months Ended

June 30, 2022

September 30, 2022

Revenues from external customers

2 unchanged sentences

Segment profit (loss) before income taxes

For the Six Months Ended

June 30, 2022

( 8,437,047 )

( 3,302,344 )

For the Nine Months Ended

September 30, 2022

Revenues from external customers

1 unchanged sentence

$ 134,237,417

$ 281,469,781

Intersegment revenues

( 6,108,571 )

Segment profit before income taxes

Segment profit (loss) before income taxes

( 7,518,209 )

Identifiable Assets

6 unchanged sentences

For the Three Months Ended

June 30, 2021

September 30, 2021

Revenues from external customers

3 unchanged sentences

Segment profit before income taxes

For the Six Months Ended

June 30, 2021

For the Nine Months Ended

September 30, 2021

Revenues from external customers

1 unchanged sentence

$ 216,764,653

$ 358,918,052

Intersegment revenues

1 unchanged sentence

Segment profit before income taxes

Segment profit (loss) before income taxes

Identifiable Assets

19 unchanged sentences

Financial assets and financial liabilities whose values are based on the following:

prices for similar assets or liabilities in active markets;

a) Quoted prices for similar

assets or liabilities in active markets;

prices for identical or similar assets or liabilities in non-active markets;

models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

models whose inputs are observable, directly or indirectly, for substantially the full term

of the asset or liability.

Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are

89 unchanged sentences

following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by

their classification in the condensed consolidated balance sheet at June 30, 2022.

their classification in the condensed consolidated balance sheet at September 30, 2022.

of Fair Value Assets and Liabilities Measured on a Recurring Basis

Quoted Prices in

Active Markets

for Identical

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a recurring basis

73 unchanged sentences

Fair Value of Financial Instruments (Continued)

For Level 3 assets and liabilities measured at fair value on a recurring

basis as of June 30, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

and Liabilities Measured at Fair Value on A Recurring Basis

Fair Value at

Loans held for sale

Market approach

Investor contract pricing as a percentage

of unpaid principal balance

Derivatives - loan commitments (net)

Market approach

Pull-through rate

Initial-Value

Fixed maturity securities available for sale

Broker quotes

Pricing quotes

Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2021, the significant unobservable inputs

Level 3 assets and liabilities measured at fair value on a recurring basis as of September 30, 2022, the significant unobservable inputs

used in the fair value measurements were as follows:

and Liabilities Measured at Fair Value on A Recurring Basis

held for sale

$ 161,981,923

contract pricing as a percentage of unpaid principal balance

2 unchanged sentences

maturity securities available for sale

Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2021, the significant unobservable inputs

used in the fair value measurements were as follows:

Range of Inputs

Fair Value at

Loans held for sale

$ 302,776,827

contract pricing as a percentage of unpaid principal balance

Derivatives - loan commitments (net)

Initial-Value

Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the

six months ending June 30, 2022:

nine months ending September 30, 2022:

of Changes in the Consolidated Balance Sheet Line Items Measured Using Level 3 Inputs

Fixed Maturity

Available for Sale

Available for

Balance - December 31, 2021

4 unchanged sentences

( 2,987,906,269 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

Included in earnings

Included in earnings (loss)

( 2,843,155 )(1)

Included in other comprehensive income

Balance - June 30, 2022

59,190,794 (1)

As a component of Mortgage fee income on the condensed consolidated statements of earnings

As a component of Net investment income on the condensed consolidated statements of earnings

Included in other comprehensive income (loss)

Balance - September 30, 2022

$ 161,981,923

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the

six months ending June 30, 2021:

Available for Sale

- December 31, 2020

nine months ending September 30, 2021:

Fixed Maturity

Available for

Balance - December 31, 2020

$ 422,772,418

and purchases

Originations and purchases

4,243,072,600

maturities and paydowns

Sales, maturities and paydowns

( 4,484,170,804 )

to mortgage loans held for investment

gains (losses):

Transfer to mortgage loans held for investment

Total gains (losses):

Included in earnings

( 549,093 )(1)

131,183,580 (1)

in other comprehensive income

- June 30, 2021

Included in other comprehensive income

Balance - September 30, 2021

$ 312,655,843

a component of Mortgage fee income on the condensed consolidated statements of earnings

a component of Net investment income on the condensed consolidated statements of earnings

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the

three months ending June 30, 2022:

three months ending September 30, 2022:

Fixed Maturity

Available for Sale

Balance - March 31, 2022

Available for

Balance - June 30, 2022

$ 209,860,409

Originations and purchases

1,010,742,878

Sales, maturities and paydowns

( 800,430,402 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

3 unchanged sentences

Included in other comprehensive income

Balance - June 30, 2022

Balance - September 30, 2022

$ 161,981,923

As a component of Mortgage fee income on the condensed consolidated

statements of earnings

As a component of Net investment income on the condensed consolidated

statements of earnings

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the

three months ending June 30, 2021:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - March 31, 2021

three months ending September 30, 2021:

Fixed Maturity

Available for

Balance - June 30, 2021

$ 296,728,086

8 unchanged sentences

Included in other comprehensive income

Balance - June 30, 2021

Balance - September 30, 2021

$ 312,655,843

As a component of Mortgage fee income on the condensed consolidated

statements of earnings

As a component of Net investment income on the condensed consolidated

statements of earnings

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

following table summarizes Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis

by their classification in the condensed consolidated balance sheet at June 30, 2022.

by their classification in the condensed consolidated balance sheet at September 30, 2022.

of Fair Value Assets Measured on a Nonrecurring Basis

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Quoted Prices in Active

Markets for Identical Assets

Significant Observable

Significant Unobservable

Assets accounted for at fair value on a nonrecurring basis

Impaired mortgage loans held for investment

Total assets accounted for at fair value on a nonrecurring basis

Total assets accounted for at fair value on a nonrecurring

following table summarizes Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis

by their classification in the condensed consolidated balance sheet at December 31, 2021.

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Quoted Prices in Active

Markets for Identical Assets

Significant Observable

Significant Unobservable

Assets accounted for at fair value on a nonrecurring basis

1 unchanged sentence

Impaired real estate held for sale

Total assets accounted for at fair value on a nonrecurring basis

Total assets accounted for at fair value on a nonrecurring

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

9 unchanged sentences

Therefore, for substantially all financial instruments, the fair value estimates presented herein are not

necessarily indicative of the amounts the Company could have realized in a sales transaction at June 30, 2022 and December 31, 2021.

necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2022 and December 31, 2021.

carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy,

are summarized as follows as of June 30, 2022:

are summarized as follows as of September 30, 2022:

of Financial Instruments Carried at Other Than Fair Value

23 unchanged sentences

( 113,983,260 )

in other investments and policy loans on the condensed consolidated balance sheets

loans held for investment

in future policy benefits and unpaid claims on the condensed consolidated balance sheets

(1) Included in other

investments and policy loans on the condensed consolidated balance sheets

(2) Mortgage loans

held for investment

(3) Included in future

policy benefits and unpaid claims on the condensed consolidated balance sheets

(4) Refer to Note 15

of the Notes to Condensed Consolidated Financial Statements

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

28 unchanged sentences

( 116,215,717 )

in other investments and policy loans on the condensed consolidated balance sheets

loans held for investment

in future policy benefits and unpaid claims on the condensed consolidated balance sheets

(1) Included in other

investments and policy loans on the consolidated balance sheets

(2) Mortgage loans

held for investment

(3) Included in future

policy benefits and unpaid claims on the consolidated balance sheets

methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of these financial instruments are

114 unchanged sentences

of Derivative Assets at Fair Value

June 30, 2022

September 30, 2022

December 31, 2021

21 unchanged sentences

of Gains and Losses on Derivatives

Net Amount Gain (Loss)

Amount Gain (Loss)

Months Ended September 30

Classification

Loan commitments

$ ( 3,271,282 )

1 unchanged sentence

$ ( 2,843,155 )

Call and put options

$ ( 549,093 )

and put options

on investments and other assets

33 unchanged sentences

rights) of at least $ 1.00 on a rolling twelve months.

SECURITY NATIONAL FINANCIAL

CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Reinsurance, Commitments and Contingencies (Continued)

4 unchanged sentences

greater of (i) 0% , and (ii) the one-month forward-looking term rate based on SOFR and matures on June 2, 2023 .

Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax

income (excluding any changes in the fair value of mortgage servicing rights) of at least $ 1.00 on a rolling twelve months.

The Company is required

to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any

changes in the fair value of mortgage servicing rights) of at least $ 1.00 on a rolling twelve months.

agreements for warehouse lines include cross default provisions in that a covenant violation under one agreement constitutes a covenant

violation under the other agreement.

As of June 30, 2022, the Company was in compliance with all debt covenants.

As of September 30, 2022, SecurityNational Mortgage was not in compliance, but received waivers

or amendments from the warehouse banks.

In the unlikely event the Company is required to repay the warehouse lines, the Company has sufficient

cash and borrowing capacity to do so and to continue to fund its origination activities through other internal funding sources.

Contingencies and Commitments

1 unchanged sentence

and development.

As of June 30, 2022, the Company’s commitments were approximately $ 328,580,000 for these loans, of which $ 207,689,514

As of September 30, 2022, the Company’s commitments were approximately $ 302,567,000 for these loans, of which

$ 206,285,687 had been funded.

The Company will advance funds once the work has been completed and an independent inspection is made.

The maximum loan

commitment ranges between 50 % and 80 % of appraised value.

The Company receives fees and interest for these loans and the interest rate

is generally fixed 5.25 % to 8.00 % per annum.

The maximum loan commitment ranges between 50 % and 80 % of appraised value.

The Company receives fees and interest for these loans and

the interest rate is generally fixed 5.25 % to 8.00 % per annum.

Maturities range between six and eighteen months.

19 unchanged sentences

which, if adversely determined, would have a material adverse effect on its financial condition or results of operations.

SECURITY NATIONAL FINANCIAL

CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Mortgage Servicing Rights

Company initially records these MSRs at fair value as discussed in Note 8.

Also, refer to Note 15 regarding a subsequent event for the

being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method.

13 unchanged sentences

of Mortgage Servicing Rights

As of June 30

As of December 31

Amortized cost:

4 unchanged sentences

( 14,851,880 )

Application of valuation allowance to write down MSRs with other than temporary

Application of valuation allowance to write down MSRs with other than temporary impairment

Balance before valuation allowance at end of period

1 unchanged sentence

Balance at beginning of year

Application of valuation allowance to write down MSRs with other than temporary

Application of valuation allowance to write down MSRs with other than temporary impairment

Balance at end of period

1 unchanged sentence

Estimated fair value of MSRs at end of period

Included in other expenses on the condensed consolidated statements

SECURITY NATIONAL FINANCIAL

CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

Mortgage Servicing Rights (Continued)

(1) Included in mortgage

fee income on the condensed consolidated statements of earnings

(2) Included in other

expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

12) Mortgage Servicing Rights

following table summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost.

This projection

was developed using the assumptions made by management in its June 30, 2022 valuation of MSRs.

was developed using the assumptions made by management in its September 30, 2022 valuation of MSRs.

The assumptions underlying the following

3 unchanged sentences

of Finite-Lived Intangible Assets, Future Amortization Expense, Mortgage Servicing Rights

Estimated MSR Amortization

Estimated MSR

Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed consolidated

1 unchanged sentence

of Other Revenues

Three Months Ended

Six Months Ended

Contractual servicing fees

servicing fees

following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio.

of Unpaid Principal Balances of the Servicing Portfolio

As of June 30

As of December 31 2021

September 30 2022

December 31 2021

Servicing UPB

3 unchanged sentences

of Assumptions Used in Determining MSR Value

June 30, 2022

September 30, 2022

December 31, 2021

SECURITY NATIONAL FINANCIAL

CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

Company’s overall effective tax rate for the three months ended June 30, 2022 and 2021 was 24.4 % and 23.3 %, respectively, which

resulted in a provision for income taxes of $ 1,155,397 and $ 3,419,873 , respectively.

The Company’s overall effective tax rate for

the six months ended June 30, 2022 and 2021 was 25.8 % and 24.6 %, respectively, which resulted in a provision for income taxes of $ 2,370,195

and $ 7,646,213 , respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Company’s overall effective tax rate for the three months ended September 30, 2022 and 2021 was 28.7 % and 23.7 % , respectively,

which resulted in a provision for income taxes of ($ 949,159 ) and $ 3,352,663 , respectively.

The Company’s overall effective tax

rate for the nine months ended September 30, 2022 and 2021 was 24.2 % and 24.3 % , respectively, which resulted in a provision for income

taxes of $ 1,421,036 and $ 10,998,876 , respectively.

The Company’s effective tax rates differ from the U.S.

federal statutory rate of 21 % partially due

to its provision for state income taxes.

The increase in the effective tax rate when compared to the prior year is partially due to a

larger increase to the valuation allowance in the current period when compared to the prior period year.

federal statutory rate

of 21 % partially due to its provision for state income taxes.

The decrease in the effective tax rate when compared to the prior year

is partially due to the Company’s provision for state income taxes.

income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete

34 unchanged sentences

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

Revenues from Contracts with Customers (Continued)

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

14) Revenues from Contracts

with Customers (Continued)

opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:

14 unchanged sentences

Increase/(decrease)

Included in Receivables, net on the condensed consolidated

balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three months ended June 30, 2022 and 2021

was $ 1,526,324 and $ 1,309,936 , respectively, and for the six months ended June 30, 2022 and 2021 was $ 2,590,428 and $ 2,444,937 , respectively.

(1) Included in Receivables,

net on the condensed consolidated balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three months ended September 30, 2022 and

2021 was $ 1,034,035 and $ 1,143,745 , respectively, and for the nine months ended September 30, 2022 and 2021 was $ 3,624,463 and $ 3,588,682 ,

respectively.

difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results

3 unchanged sentences

of Revenues of the Cemetery and Mortuary Contracts

Three Months Ended

Six Months Ended

Major goods/service lines

goods/service lines

Net mortuary and cemetery

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred at a point in time

of Revenue Recognition

transferred at a point in time

Net mortuary and cemetery

SECURITY NATIONAL FINANCIAL

CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated

Financial Statements

June 30, 2022 (Unaudited)

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2022 (Unaudited)

Revenues from Contracts with Customers (Continued)

2 unchanged sentences

of Reconciliation of Revenues from Cemetery and Mortuary Contracts to Business Segment Information

Three Months Ended

Six Months Ended

Net mortuary and cemetery sales

Gains (losses) on investments and other assets

Net investment income

Other revenues

Revenues from external customers

mortuary and cemetery sales

(losses) on investments and other assets

( 1,615,253 )

investment income

from external customers

Subsequent Events

31, 2022, the Company, through its wholly owned subsidiary, SecurityNational Mortgage Company (“SecurityNational Mortgage”)

sold certain of its mortgage loan servicing rights (“MSRs”) to PNC Bank, NA for aggregate gross consideration of approximately

$ 89.7 million.

The MSRs related to mortgage loans previously originated by SecurityNational Mortgage in aggregate unpaid principal amount

of approximately $ 7.05 billion.

Substantially all of the consideration has been received by SecurityNational Mortgage, with the remainder

subject to certain holdbacks during transfer of the MSRs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements