What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 978 added, 760 removed, 2466 unchanged (41% of the section changed)

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

9 unchanged sentences

have audited the accompanying consolidated balance sheets of Security National Financial Corporation and subsidiaries (the “Company”)

as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and

as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and

cash flows for each of the years then ended, and the related notes and the schedules listed in the Index at Item 15 (collectively referred

57 unchanged sentences

BALANCE SHEETS

Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $ 236,303,310 and $ 265,150,484 for 2021 and 2020)

maturity securities, available for sale, at estimated fair value

(amortized cost of $ 362,750,511 and $ 236,303,310 for 2022 and

$ 345,858,492

$ 259,287,603

Equity securities at estimated fair value (cost of $ 8,275,772 and $ 9,698,490 for 2021 and 2020)

Mortgage loans held for investment (net of allowances for loan losses of $ 1,699,902 and $ 2,005,127 for 2021 and 2020)

Real estate held for investment (net of accumulated depreciation of $ 17,692,038 and $ 13,800,973 for 2021 and 2020)

Real estate held for sale

Other investments and policy loans (net of allowances for doubtful accounts of $ 1,686,218 and $ 1,645,475 for 2021 and 2020)

Accrued investment income

Total investments

Cash and cash equivalents

Loans held for sale at estimated fair value

Receivables (net of allowances for doubtful accounts of $ 1,800,725 and $ 1,685,382 for 2021 and 2020)

Restricted assets (including $ 5,205,510 and $ 3,989,415 for 2021 and 2020 at estimated fair value)

Cemetery perpetual care trust investments (including $ 4,087,245 and $ 2,810,070 for 2021 and 2020 at estimated fair value)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition costs

Mortgage servicing rights, net

Property and equipment, net

Value of business acquired

securities at estimated fair value (cost of $ 9,942,265 and

$ 8,275,772 for 2022 and 2021)

loans held for investment (net of allowances for loan losses

of $ 1,970,311 and $ 1,699,902 for 2022 and 2021)

estate held for investment (net of accumulated depreciation

of $ 23,793,204 and $ 17,692,038 for 2022 and 2021)

estate held for sale

investments and policy loans (net of allowances for doubtful

accounts of $ 1,609,951 and $ 1,686,218 for 2022 and 2021)

investment income

and cash equivalents

held for sale at estimated fair value

(net of allowances for doubtful accounts of $ 2,229,791 and

$ 1,800,725 for 2022 and 2021)

assets (including $ 6,565,552 and $ 5,205,510 for 2022 and 2021

at estimated fair value)

perpetual care trust investments (including $ 3,859,893 and $ 4,087,245 for 2022 and 2021 at estimated fair value)

from reinsurers

land and improvements

policy and pre-need contract acquisition costs

servicing rights, net

and equipment, net

Value of business

$ 1,461,112,892

3 unchanged sentences

BALANCE SHEETS (Continued)

Liabilities and Stockholders’ Equity

Future policy benefits and unpaid claims

and Stockholders’ Equity

policy benefits and unpaid claims

$ 889,327,303

$ 863,274,693

Unearned premium reserve

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract revenues

Cemetery perpetual care obligation

Accounts payable

Other liabilities and accrued expenses

Total liabilities

premium reserve

and other loans payable

pre-need cemetery and mortuary contract revenues

perpetual care obligation

liabilities and accrued expenses

1,168,325,965

1,247,826,472

Stockholders’ Equity

Preferred Stock:

Preferred stock - non-voting-$ 1.00 par value;

Stockholders’

stock - non-voting-$ 1.00 par value;

5,000,000 shares authorized;

none issued or outstanding

Common Stock:

common stock - $ 2.00 par value;

5 unchanged sentences

convertible common stock - $ 2.00 par value;

3,000,000 shares authorized;

issued 2,866,565 shares in 2021 and 2,679,603 shares in 2020

6,000,000 shares

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

Common stock, value

Additional paid-in capital

Accumulated other comprehensive income, net of taxes

Retained earnings

Treasury stock, at cost - 108,079 Class A shares and 109,193 Class C shares in 2021;

227,852 Class A shares and 10,985 Class C shares in 2020

paid-in capital

other comprehensive income (loss), net of taxes

( 13,070,277 )

stock, at cost - 525,870 Class A shares and 109,193 Class C shares

34,016 Class A shares and 109,193 Class C shares

( 4,366,651 )

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

( 1,845,624 )

stockholders’ equity

Liabilities and Stockholders’ Equity

$ 1,461,112,892

$ 1,547,593,306

accompanying notes to consolidated financial statements.

1 unchanged sentence

Statements of Earnings

Years Ended December 31

Mortgage fee income

Ended December 31

$ 173,499,681

$ 263,418,230

Insurance premiums and other considerations

Net investment income

Net mortuary and cemetery sales

Gains on investments and other assets

Other than temporary impairments on investments

Total revenues

premiums and other considerations

investment income

mortuary and cemetery sales

(losses) on investments and other assets

than temporary impairments on investments

and expenses:

and other policy benefits

in future policy benefits

of deferred policy and pre-need acquisition

costs and value of business acquired

general and administrative expenses:

and rent related

on property and equipment

related to funding mortgage loans

of goods and services sold – cemeteries and mortuaries

benefits and expenses

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

Amortization of deferred policy and pre-need acquisition costs and value of business acquired

Selling, general and administrative expenses:

Rent and rent related

Depreciation on property and equipment

Provision for loan loss reserve

Costs related to funding mortgage loans

Interest expense

Cost of goods and services sold – cemeteries and mortuaries

Total benefits and expenses

Earnings before income taxes

Income tax expense

before income taxes

( 8,686,560 )

( 12,281,785 )

Net earnings per Class A equivalent common share (1)

Net earnings per Class A equivalent common share - assuming

Weighted average Class A equivalent common shares outstanding (1)

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

(1) 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 stock

earnings per Class A equivalent common share (1)

earnings per Class A equivalent common share -

average Class A equivalent common shares

outstanding (1)

average Class A equivalent common shares

outstanding-assuming dilution (1)

(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.

2 unchanged sentences

Statements of comprehensive income

Years Ended December 31

Other comprehensive income:

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

Ended December 31

comprehensive income:

losses on fixed maturity securities available for sale

( 39,331,688 )

Unrealized gains (losses) on restricted assets

Unrealized losses on cemetery perpetual care trust investments

Foreign currency translation adjustments

Other comprehensive income (loss), before income tax

( 6,517,731 )

Income tax benefit (expense)

losses on restricted assets

losses on cemetery perpetual care trust investments

currency translation adjustments

comprehensive loss, before income tax

( 39,423,169 )

Other comprehensive income (loss), net of income tax

( 6,549,260 )

Comprehensive income

comprehensive loss, net of income tax

( 31,140,725 )

( 5,172,685 )

Comprehensive

income (loss)

$ ( 5,450,423 )

accompanying notes to consolidated financial statements.

1 unchanged sentence

Statements of Stockholders’ Equity

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Balance at December 31, 2019

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

at December 31, 2020

$ 153,739,167

Other comprehensive income

Stock based compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

$ ( 1,833,272 )

$ 263,987,053

Stock dividends

comprehensive loss

( 5,172,685 )

Conversion Class C to Class A

Balance at December 31, 2020

( 5,172,685 )

Other comprehensive loss

based compensation expense

Exercise of stock

of treasury stock

( 5,769,735 )

Other comprehensive income (loss)

( 8,720,668 )

Class C to Class A

at December 31, 2021

( 1,845,624 )

Stock based compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

comprehensive loss

( 31,140,725 )

Stock dividends

based compensation expense

Exercise of stock

of treasury stock

( 7,770,081 )

Conversion Class C to Class A

Balance at December 31, 2021

( 7,663,905 )

( 8,067,485 )

Class C to Class A

at December 31, 2022

$ ( 13,070,277 )

$ 202,160,306

$ ( 4,366,651 )

$ 292,786,927

accompanying notes to consolidated financial statements.

2 unchanged sentences

Ended December 31

Cash flows from operating

flows from operating activities:

to reconcile net earnings to net cash used in operating activities:

investments and other assets

( 6,265,134 )

(gains) on investments and other assets

( 6,265,134 )

temporary impairments on investments

than temporary impairments on investments

for loan losses and doubtful accounts

Net amortization

of deferred fees and costs, premiums and discounts

amortization of deferred fees and costs, premiums and discounts

( 1,018,200 )

1 unchanged sentence

for deferred income taxes

pre-need acquisition costs deferred

( 9,954,005 )

and pre-need acquisition costs deferred

( 20,233,669 )

pre-need acquisition costs amortized

Value of business acquired

( 19,985,257 )

and pre-need acquisition costs amortized

of business acquired amortized

servicing rights, additions

2 unchanged sentences

of mortgage servicing rights

compensation expense

plans funded with treasury stock

in fair value of loans held for sale

gains on the sale of mortgage servicing rights

( 34,051,938 )

based compensation expense

plans funded with treasury stock

change in fair value of loans held for sale

of loans held for sale

4 unchanged sentences

5,900,076,766

on sales of loans held for sale

gains on sales of loans held for sale

( 74,779,721 )

( 177,876,915 )

assets and liabilities:

improvements held for sale

Future policy

benefits and unpaid claims

in assets and liabilities:

and improvements held for sale

policy benefits and unpaid claims

operating assets and liabilities

( 32,088,511 )

cash provided by (used in) operating activities

( 129,627,207 )

Cash flows from investing

cash provided by operating activities

flows from investing activities:

of fixed maturity securities

1 unchanged sentence

( 18,857,131 )

and maturities of fixed maturity securities

calls and maturities of fixed maturity securities

of equity securities

1 unchanged sentence

( 1,950,554 )

equity securities

in restricted assets

( 1,954,437 )

in cemetery perpetual care trust investments

( 2,755,856 )

of equity securities

changes in restricted assets

changes in cemetery perpetual care trust investments

loans held for investment, other investments and policy loans made

2 unchanged sentences

received for mortgage loans held for investment, other investments and policy loans

from the sale of mortage servicing rights

of property and equipment

1 unchanged sentence

( 5,219,928 )

property and equipment

of property and equipment

of real estate

1 unchanged sentence

( 92,403,534 )

of real estate

paid for purchase of subsidiaries, net of cash acquired

( 12,625,142 )

cash provided by (used in) investing activities

cash used in investing activities

( 37,161,736 )

( 63,613,606 )

NATIONAL FINANCIAL CORPORATION

Statements of Cash Flows (Continued)

Years Ended December 31

Cash flows from financing activities:

Investment contract receipts

Investment contract withdrawals

Ended December 31

flows from financing activities:

contract receipts

contract withdrawals

( 15,795,677 )

( 15,244,629 )

Proceeds from stock options exercised

Purchase of treasury stock

from stock options exercised

of treasury stock

( 7,663,905 )

( 5,769,735 )

Repayment of bank loans

of bank loans

( 50,308,296 )

( 69,039,725 )

Proceeds from bank loans

Net change in warehouse line borrowings for loans held for sale

from bank loans

change in warehouse line borrowings for loans held for sale

( 98,943,607 )

Net cash provided by (used in) financing activities

( 84,576,055 )

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

cash used in financing activities

( 101,219,183 )

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

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

( 55,075,440 )

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

( 7,930,465 )

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

Interest (net of amount capitalized)

Non Cash Investing and Financing Activities:

Right-of-use assets obtained in exchange for operating lease liabilities

Accrued real estate construction costs and retainage

Transfer of property and equipment to real estate held for investment

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

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

Right-of-use assets obtained in exchange for finance lease liabilities

See Note 20 regarding non cash transactions included in the acquisitions of Rivera Funerals, Cremations and Memorial Gardens and Holbrook Mortuary

cash equivalents, restricted cash and restricted cash equivalents at beginning of year

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

$ 133,483,817

$ 141,414,282

Disclosure of Cash Flow Information:

paid during the year for:

Cash Investing and Financing Activities:

of loans held for sale to mortgage loans held for investment

loans held for investment foreclosed into real estate held for investment

assets obtained in exchange for operating lease liabilities

real estate construction costs and retainage

of property and equipment to real estate held for investment

Note 20 regarding non cash transactions included in the acquisitions of Rivera Funerals, Cremations and Memorial Gardens and Holbrook

Reconciliation

1 unchanged sentence

in the table below:

Years Ended December 31

Cash and cash equivalents

$ 131,354,470

$ 106,219,429

Restricted assets

Cemetery perpetual care trust investments

Total cash, cash equivalents, restricted cash and restricted cash equivalents

Ended December 31

and cash equivalents

$ 120,919,805

$ 131,354,470

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

perpetual care trust investments

cash, cash equivalents, restricted cash and restricted cash equivalents

$ 133,483,817

11 unchanged sentences

mid-western and southern regions of the United States.

The cemetery and mortuary segment of the Company consists of eleven mortuaries

The cemetery and mortuary segment of the Company consists of eight mortuaries

and five cemeteries in Utah, one cemetery in California, and four mortuaries and one cemetery in New Mexico.

18 unchanged sentences

those used in determining the liability for future policy

those used in determining the value of mortgage servicing rights;

those used in determining allowances for loan losses for

mortgage loans held for investment;

those used in determining loan loss reserve;

and those used in determining deferred tax assets and

Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in

all material respects.

benefits and unearned revenue;

those used in determining the estimated future costs for pre-need sales;

those used in determining the

value of mortgage servicing rights;

those used in determining allowances for loan losses for mortgage loans held for investment;

used in determining loan loss reserve;

and those used in determining deferred tax assets and liabilities.

Although some variability is

inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.

Company’s management determines the appropriate classifications of investments in fixed maturity securities and equity securities

262 unchanged sentences

is recognized in current period earnings and the carrying value of the MSRs is adjusted through a valuation allowance.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

periodically reviews the various loan strata to determine whether the value of the MSRs in a given stratum is impaired and likely to

7 unchanged sentences

lesser of the useful life or remaining lease terms.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Significant Accounting Policies (Continued)

assets to be held and used, including property and equipment and real estate held for investment, are reviewed for impairment whenever

4 unchanged sentences

No impairment of long-lived assets has been recognized in the accompanying

financial statements except for certain impairments of real estate held for investment as disclosed in Note 2.

financial statements except for certain impairments of real estate held for sale as disclosed in Note 2.

Banking Derivatives

25 unchanged sentences

can be either positive or negative depending upon the change in value of the underlying mortgage loans.

Fallout rates and other factors

from the Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the

terms of the commitments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

Sale Commitments

3 unchanged sentences

reducing earnings volatility related to the recognition in earnings of changes in the values of the commitments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Significant Accounting Policies (Continued)

net changes in fair value of loan commitments and forward sale commitments are shown in current earnings as a component of mortgage fee

45 unchanged sentences

Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate

held for investment.

The Company will rent the properties until it is deemed desirable to sell them.

held for investment or held for sale.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the

6 unchanged sentences

upon the loan type as follows:

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Significant Accounting Policies (Continued)

— Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation

40 unchanged sentences

from 3 % to 6.5 %.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

Company records an unpaid claims liability for claims in the course of settlement equal to the death benefit amount less any reinsurance

10 unchanged sentences

Amounts to be paid are determined by the Board of

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

1) Significant Accounting Policies (Continued)

The expense recognized for policyholder dividends is included in surrenders and other policy benefits on the consolidated

statements of earnings.

of Insurance Premiums and Other Considerations

23 unchanged sentences

merchandise is deferred until the merchandise is delivered to the Company.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

contract sales of cemetery services (primarily merchandise delivery, installation fees and burial opening and closing fees) - revenue

5 unchanged sentences

there are no significant performance obligations remaining.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Significant Accounting Policies (Continued)

Company, through its cemetery and mortuary operations, provides guaranteed funeral arrangements wherein a prospective customer can receive

22 unchanged sentences

from these acquisitions are included in Other Assets and are determined using the income approach, relying on a relief from the royalty

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

taxes include taxes currently payable plus deferred taxes.

15 unchanged sentences

share is computed by dividing net earnings by the weighted-average number of common shares outstanding during the year used to compute

basic earnings per share plus dilutive potential incremental shares.

Basic and diluted earnings per share amounts have been adjusted

retroactively for the effect of annual stock dividends.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

1) Significant Accounting Policies (Continued)

basic earnings per share plus dilutive potential incremental shares by application of the treasury stock method.

Basic and diluted earnings

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

Based Compensation

7 unchanged sentences

of Credit Risk

a description of the concentration risk regarding available for sale debt securities, mortgage loans held for investment and real

estate held for investment, refer to Note 2 of the Notes to Consolidated Financial Statements.

a description of the concentration risk regarding available for sale debt securities, mortgage loans held for investment and real estate

held for investment, refer to Note 2, and for receivables from reinsurers, refer to Note 10 of the Notes to Consolidated Financial Statements.

Company expenses advertising costs as incurred.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Significant Accounting Policies (Continued)

Accounting Pronouncements

Standards Issued But Not Yet Adopted

Standards Adopted in 2023

“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 are measured in a manner

similar to current GAAP;

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

Company adopted this standard on January 1, 2023, and after a review of the affected assets, determined that it would decrease the opening

balance of retained earnings in stockholders’ equity by $ 671,505 on January 1, 2023.

The allowances for credit losses increased

(decreased) by the following amounts.

of Increased (Decrease) in Allowances for Credit Losses Upon ASU

loans held for investment:

$ ( 192,607 )

assets - mortgage loans held for investment:

perpetual care trust investments - mortgage loans held for investment:

Standards Issued But Not Yet Adopted

“Financial Services – Insurance (Topic 944):

17 unchanged sentences

of Investments

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2021:

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

Unrealized Gains

Unrealized Losses

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Redeemable preferred stock

Total fixed maturity securities available for sale

$ ( 2,685,277 )

of states and political subdivisions

securities including public utilities

( 11,930,773 )

Mortgage-backed

( 4,100,674 )

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

preferred stock

fixed maturity securities available for sale

$ 362,750,511

Total equity securities at estimated fair value

$ ( 19,174,861 )

Mortgage loans held for investment at amortized cost:

Residential construction

$ 345,858,492

securities at estimated fair value:

miscellaneous and all other

$ ( 948,114 )

equity securities at estimated fair value

$ ( 948,114 )

loans held for investment at amortized cost:

Unamortized deferred loan fees, net

( 1,746,605 )

Allowance for loan losses

1 unchanged sentence

Net discounts

Total mortgage loans held for investment

mortgage loans held for investment

$ 308,123,927

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

estate held for investment - net of accumulated depreciation:

real estate held for investment

$ 191,328,616

estate held for sale:

real estate held for sale

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank stock (1)

Other investments

investments and policy loans at amortized cost:

Home Loan Bank stock (1)

Allowance for doubtful accounts

( 1,609,951 )

Total policy loans and other investments

Accrued investment income

Total investments

policy loans and other investments

investment income

$ 948,963,125

Includes $ 905,700 of Membership stock and $ 1,641,400

of Activity stock due to short-term advances and letters of credit.

(1) Includes $ 938,500

of Membership stock and $ 1,661,800 of Activity stock due to short-term advances and letters of credit.

NATIONAL FINANCIAL CORPORATION

3 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, 2020:

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

Unrealized Gains

Unrealized Losses

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Redeemable preferred stock

Total fixed maturity securities available for sale

of states and political subdivisions

securities including public utilities

Mortgage-backed

preferred stock

fixed maturity securities available for sale

$ 236,303,310

1 unchanged sentence

$ 259,287,603

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

securities at estimated fair value:

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:

Residential construction

loans held for investment at amortized cost:

Unamortized deferred loan fees, net

( 1,161,132 )

Allowance for loan losses

1 unchanged sentence

Net discounts

( 1,260,896 )

Total mortgage loans held for investment

mortgage loans held for investment

$ 277,306,046

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

estate held for investment - net of accumulated depreciation:

real estate held for investment

$ 197,365,797

estate held for sale:

real estate held for sale

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank stock (1)

Other investments

investments and policy loans at amortized cost:

Home Loan Bank stock (1)

Allowance for doubtful accounts

( 1,686,218 )

Total policy loans and other investments

Accrued investment income

Total investments

policy loans and other investments

investment income

$ 823,555,327

Includes $ 866,900 of Membership stock and $ 1,639,700 of Activity

stock due to short-term advances and letters of credit.

(1) Includes $ 905,700 of Membership

stock and $ 1,641,400 of Activity stock due to short-term advances and letters of credit.

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

Maturity Securities

following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at December 31,

2021 and at December 31, 2020.

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

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

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

The unrealized losses were primarily related to interest rate fluctuations and inflation.

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

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

At December 31, 2021

Obligations of States and Political Subdivisions

Corporate Securities

Mortgage and other asset-backed securities

Total unrealized losses

At December 31, 2020

Obligations of States and Political Subdivisions

Corporate Securities

Mortgage and other asset-backed securities

Total unrealized losses

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

December 31, 2022

Treasury securities and obligations of U.S.

Government agencies

of States and Political Subdivisions

and other asset-backed securities

unrealized losses

$ 267,774,539

$ 280,964,126

December 31, 2021

of States and Political Subdivisions

and other asset-backed securities

unrealized losses

were 713 securities with fair value of 93.6 % of amortized cost at December 31, 2022.

1 unchanged sentence

of amortized cost at December 31, 2021.

Credit losses of $ 39,502 and $ 370,975 have been recognized for the years ended December 31, 2021

and 2020, respectively.

Credit losses of nil and $ 39,502 have been recognized for the years ended December 31, 2022 and

2021, respectively.

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

24 unchanged sentences

recognized in earnings on fixed maturity securities available for sale.

of Earnings on Fixed Maturity Securities

Balance of credit-related OTTI at January 1

Additions for credit impairments recognized on:

Securities not previously impaired

Securities previously impaired

Reductions for credit impairments previously recognized on:

Securities that matured or were sold during the period (realized)

Securities due to an increase in expected cash flows

Balance of credit-related OTTI at December 31

Schedule of Earnings on Fixed Maturity

of credit-related OTTI at January 1

for credit impairments recognized on:

not previously impaired

previously impaired

for credit impairments previously recognized on:

that matured or were sold during the period (realized)

due to an increase in expected cash flows

of credit-related OTTI at December 31

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31,

2 unchanged sentences

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

of Investments Classified by Contractual Maturity Date

Estimated Fair

Due in 1 year

Due in 2-5 years

Due in 5-10 years

Due in more than 10 years

Mortgage-backed securities

Redeemable preferred stock

Schedule of Investments Classified by Contractual

Maturity Date

in 5-10 years

in more than 10 years

Mortgage-backed

preferred stock

$ 362,750,511

5 unchanged sentences

any cash borrowings from the FHLB.

As of December 31, 2021, the Company owed $- 0 - to the FHLB and its estimated maximum borrowing capacity

As of December 31, 2022, the Company owed nil to the FHLB and its estimated maximum borrowing capacity

was $ 86,032,116 .

4 unchanged sentences

Related Earnings

following tables presents the net 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.

of Gain (Loss) on Investments

Years Ended December 31

Fixed maturity securities available for sale:

Gross realized gains

Gross realized losses

Other than temporary impairments

Equity securities:

Gains on securities sold

Unrealized gains on securities held at the end of the period

Other assets:

Gross realized gains

Gross realized losses

following table presents the net 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

Ended December 31

maturity securities available for sale:

realized gains

realized losses

than temporary impairments

(losses) on securities sold

gains (losses) on securities held at the

end of the period

( 2,109,556 )

loans held for investment:

realized gains

realized losses

estate held for investment and sale:

realized gains

realized losses

( 2,426,428 )

assets, including call and put option derivatives:

realized gains

realized losses

$ ( 857,460 )

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

using the specific identification method.

realized gains and losses includes gains and losses by the restricted assets and cemetery perpetual care trust investments of the cemeteries

and mortuaries of $ 817,000 in net losses and $ 933,045 in net gains for the years ended December 31, 2022 and 2021, respectively.

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

1 unchanged sentence

Categories of Net Investment Income

Years Ended December 31

Proceeds from sales

Gross realized gains

Gross realized losses

Ended December 31

realized gains

realized losses

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

categories of net investment income were as follows:

Years Ended December 31

Fixed maturity securities available for sale

Equity securities

Mortgage loans held for investment

Real estate held for investment and sale

Insurance assignments

Other investments

Cash and cash equivalents

Gross investment income

Investment expenses

Ended December 31

maturity securities available for sale

loans held for investment

estate held for investment and sale

and cash equivalents

investment income

( 17,453,334 )

( 14,414,793 )

Net investment income

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 1,472,295 and $ 676,313 for the

years ended December 31, 2021 and 2020, respectively.

investment income

investment income includes income earned by the restricted assets and cemetery perpetual care trust investments of the cemeteries and

mortuaries of $ 2,404,277 and $ 1,472,295 for the years ended December 31, 2022 and 2021, respectively.

investment income on real estate consists primarily of rental revenue.

2 unchanged sentences

on deposit for regulatory authorities as required by law amounted to $ 11,032,165 and $ 10,168,853 at December 31, 2022 and 2021, respectively

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

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

The restricted securities

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

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

23 unchanged sentences

and population and assets that provide operational efficiencies.

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 does

use 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.

does use 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 $ 129,330,119 and $ 134,251,205 as

2 unchanged sentences

31, 2022 and 2021, respectively.

the years ended December 31, 2021 and 2020, the Company recorded impairment losses on commercial real estate held for sale of $ 2,028,378

the years ended December 31, 2022 and 2021, the Company recorded impairment losses on commercial real estate held for sale of nil and

$ 2,028,378 , respectively.

Impairment losses are included in gains (losses) on investments and other assets on the consolidated statements

the years ended December 31, 2022 and 2021, the Company recorded depreciation expense on commercial real estate held for investment of

$ 6,090,575 and $ 3,592,207 , respectively.

These impairment losses relate to a funeral home and an office building held by the life insurance segment.

The funeral home was subsequently sold.

Impairment losses are included in gains (losses) on investments and other assets on the consolidated

statements of earnings.

Commercial real estate held for investment is stated at cost and is depreciated over the estimated

useful life, primarily using the straight-line method.

Depreciation is included in net investment income on the consolidated statements

leases arise from the leasing of the Company’s commercial real estate held for investment.

Initial lease terms generally range

from three to ten years .

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

of Commercial Real Estate Investment

Net Ending Balance

Total Square Footage

Schedule of Commercial Real Estate Investment

Ending Balance

Square Footage

$ 147,627,946

2 unchanged sentences

$ 155,393,335

Includes Center53 phase 1 and phase 2

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

Net Ending Balance

Total Square Footage

Mississippi (1)

Approximately 93 acres of undeveloped land, in 2021, the existing

building was removed

Improved commercial pad

(1) Includes Center53

phase 1 and phase 2

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Investments (Continued)

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.

following is a maturity analysis of the annual undiscounted cash flows of the operating lease payments to be received.

Schedule of Annual Undiscounted Cash Flows of Operating Lease Payments

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

Ending Balance

Square Footage

(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.

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.

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

the years ended December 31, 2021 and 2020, the Company recorded impairment losses on residential real estate held for sale of $- 0 - and

$ 43,394 , respectively.

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

across the country.

the years ended December 31, 2022 and 2021, the Company recorded impairment losses on residential real estate held for sale of $ 94,400

and nil , respectively.

These impairment losses are included in gains (losses) on investments and other assets on the consolidated statements

net ending balance of foreclosed residential real estate included in residential real estate held for investment or sale is $ 1,190,602

and $ 4,327,079 as of December 31, 2021 and 2020, respectively.

the years ended December 31, 2022 and 2021, the Company recorded depreciation expense on residential real estate held for investment

of $ 10,592 and $ 12,850 , respectively.

Residential real estate held for investment is stated at cost and is depreciated over the estimated

useful life, primarily using the straight-line method.

Depreciation is included in net investment income on the consolidated statements

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Investments (Continued)

net ending balance of foreclosed residential real estate included in residential real estate held for investment or sale was $ 11,010,029

and $ 1,190,602

as of December 31, 2022 and 2021, respectively.

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

of Residential Real Estate Investment

Net Ending Balance

Washington (2)

Residential Real Estate

Schedule of Residential Real Estate Investment

Ending Balance

(1) Including subdivision

2 unchanged sentences

following table presents additional information regarding the Company’s subdivision land developments in Utah.

Lots available for sale

Lots to be developed

available for sale

to be developed

Ending Balance

Residential Real Estate Investment

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

Ending Balance

estate held for sale

properties are all actively being marketed with the assistance of residential real estate brokers.

The Company expects these properties

to sell within the coming 12 months.

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Investments (Continued)

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

Net Ending Balance

Real Estate held for

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.

Estate Owned and Occupied by the Company

6 unchanged sentences

Square Footage Occupied by the Company

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

433 Ascension Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2

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

26 unchanged sentences

At December 31, 2021, the Company had 70 %, 7 %, 5 %, 4 %, 4 % and 2 % of its mortgage loans from

borrowers located in the states of Utah, Florida, Texas, California, Nevada and Arizona, respectively.

borrowers located in the states of Utah, Florida, California, Texas, Nevada and Arizona, respectively.

NATIONAL FINANCIAL CORPORATION

5 unchanged sentences

presents the valuation allowance for loan losses as a contra-asset account.

of Allowance for Loan Losses as Contra- Asset Account

Schedule of Allowance for Loan Losses as

Contra Asset Account

Residential Construction

35 unchanged sentences

$ 276,062,489 (1)

corrected from that previously reported due to a typographical error.

NATIONAL FINANCIAL CORPORATION

4 unchanged sentences

Schedule of Aging of Mortgage Loans

December 31, 2022

30-59 Days Past Due

60-89 Days Past Due

Than 90 Days (1)

Process of Foreclosure (1)

Mortgage Loans

for Loan Losses

Greater Than 90 Days (1)

In Process of Foreclosure (1)

Total Past Due

Total Mortgage Loans

Allowance for Loan Losses

( 1,739,980 )

( 1,970,311 )

deferred loan fees, net

discounts, net

Mortgage Loans

Unamortized deferred loan fees, net

( 1,212,994 )

( 1,746,605 )

Days Past Due

Than 90 Days (1)

Process of Foreclosure (1)

Mortgage Loans

for Loan Losses

Unamortized discounts, net

Net Mortgage Loans

$ 172,139,077

$ 308,123,927

deferred loan fees, net

December 31, 2021

30-59 Days Past Due

60-89 Days Past Due

Greater Than 90 Days (1)

In Process of Foreclosure (1)

Total Past Due

Total Mortgage Loans

Allowance for Loan Losses

( 1,469,571 )

discounts, net

( 1,699,902 )

Mortgage Loans

Unamortized deferred loan fees, net

Unamortized discounts, net

Net Mortgage Loans

$ 174,691,408

$ 277,306,046

(1) Interest income

is not recognized on loans past due greater than 90 days or in foreclosure.

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

NATIONAL FINANCIAL CORPORATION

27 unchanged sentences

Risk Profile Based on Performance Status

Company’s mortgage loan held for investment portfolio is monitored based on performance of the loans.

Company’s mortgage loans held for investment portfolio is monitored based on performance of the loans.

Monitoring a mortgage loan

41 unchanged sentences

loans held for investment and is included in mortgage fee income on the consolidated statement of earnings.

See Note 17 of the Notes

to Consolidated Financial Statements for additional disclosures regarding loans held for sale.

There aren’t any loans

that are 90 or more days past due and on a nonaccrual status as of December 31, 2022.

See Note 17 of the Notes to Consolidated Financial

Statements for additional disclosures regarding loans held for sale.

following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale.

4 unchanged sentences

Unpaid principal balance

Unrealized gain

Unrealized (loss) gain

fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale

5 unchanged sentences

Secondary gains

153,870,807 (1)

Change in fair value of loan commitments

( 4,308,638 )

( 3,113,095 )

Change in fair value of loans held for sale

( 8,834,797 )

( 8,783,376 )

Provision for loan loss reserve

4 unchanged sentences

$ 263,418,230

(1) Includes a net

gain of $ 34,051,938 for the sale of mortgage servicing rights

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

16 unchanged sentences

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

of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses

Summary of Loan Loss Reserve Included in Other Liabilities and

Accrued Expenses

Balance, beginning of period

Provision for current loan originations (1)

Additional provision for loan loss reserve

Charge-offs, net of recaptured amounts

2 unchanged sentences

Balance, at December 31

Included in Mortgage fee income

(1) Included in Mortgage

Company maintains reserves for estimated losses on current production volumes.

For the year ended December 31, 2021, $ 2,211,230 in reserves

were added at a rate of 3.9 basis points per loan, the equivalent of $ 390 per $ 1,000,000 in loans originated.

This is a decrease over

the year ended December 31, 2020, when $ 4,938,214 in reserves were added at a rate of 8.9 basis points per loan originated, the equivalent

of $ 890 per $ 1,000,000 in loans originated.

The Company also increased its loan loss reserve for the year ended December 31, 2020 by

an additional $ 16,506,030 to account for changes in estimates specific to settlements of loan losses.

See Note 10 for additional information

regarding mortgage loan loss settlements.

The unique nature of COVID-19 creates significant difficulty for forecasting potential future

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 December 31, 2021, represents its best estimate for adequate loss reserves

on loans sold.

For the year ended December 31, 2022, $ 1,078,812

in reserves were added at a rate of 3.19 basis points per loan, the equivalent of $ 319

per $ 1,000,000

in loans originated.

This is a decrease over the year ended December 31, 2021, when $ 2,211,230

in reserves were added at a rate of 3.9 basis points per loan originated, the equivalent of $ 390

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 December 31, 2022, represents its best estimate for adequate loss reserves on loans sold.

NATIONAL FINANCIAL CORPORATION

10 unchanged sentences

Net receivables

Value of Business Acquired, Intangible Assets and Goodwill

Value of Business Acquired, Goodwill and Other Intangible Assets

with regard to value of business acquired was as follows:

10 unchanged sentences

Balance at end of year

no additional acquisitions, net amortization charged to income is expected to approximate $ 1,059,000 , $ 972,000 , $ 893,000 , $ 810,000 , and

$ 753,000 for the years 2022 through 2027 .

Actual amortization may vary based on changes in assumptions or experience.

As of December

31, 2021, value of business acquired is being amortized over a weighted average life of 5.9 years.

(1) Included in Amortization

of deferred policy and pre-need acquistion costs and value of business acquired on the consolidated statements of earnings

no additional acquisitions, net amortization charged to income is expected to approximate the following:

of Acquisitions Net Amortization Charged to Income

amortization may vary based on changes in assumptions or experience.

As of December 31, 2022, value of business acquired is being amortized

over a weighted average life of 5.7 years.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2022 and 2021

Value of Business Acquired, Intangible Assets and Goodwill (Continued)

carrying value of the Company’s intangible assets were as follows which is included in other assets:

Schedule of Carrying Value of Intangible Asset

Intangible asset - trade name (1)

Intangible asset - customer lists

Intangible asset - trade name (2)

Intangible assets - other (1)

Less accumulated amortization

Balance at end of year

See Note 20 regarding the acquisition of Rivera Funerals, Cremations

and Memorial Gardens

Kilpatrick Life

Value of Business Acquired, Goodwill and Other Intangible Assets (Continued)

regarding goodwill by segment was as follows:

4 unchanged sentences

Total goodwill, net

1,734,195 (1)

Balance at December 31, 2021:

1 unchanged sentence

Total goodwill, net

1,734,195 (1)

Balance at December 31, 2022:

1 unchanged sentence

Total goodwill, net

See Note 20 regarding the acquisition of Rivera Funerals, Cremations and Memorial Gardens and Holbrook Mortuary

Goodwill is not amortized but is tested annually

for impairment.

The annual impairment tests resulted in no impairment of goodwill for the years ended December 31, 2021 and 2020.

(1) See Note 20 regarding

the acquisition of Rivera Funerals, Cremations and Memorial Gardens and Holbrook Mortuary

is not amortized but is tested annually for impairment.

The annual impairment tests resulted in no impairment of goodwill for the years

ended December 31, 2022 and 2021.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2022 and 2021

Value of Business Acquired, Goodwill and Other Intangible Assets (Continued)

carrying value of the Company’s other intangible assets were as follows which is included in other assets:

Schedule of Carrying Value of Intangible Asset

Intangible asset - trade name (1)

Intangible asset - customer lists

Intangible asset - trade name (2)

Intangible assets - other (1)

Less accumulated amortization

Balance at end of year

(1) See Note 20 regarding

the acquisition of Rivera Funerals, Cremations and Memorial Gardens

(2) Kilpatrick Life

expense for the years ended December 31, 2022 and 2021 was $ 256,000 and $ 99,999 , respectively, and is included in other expenses on the

consolidated statements of earnings.

following table summarizes the Company’s estimate of future amortization for the other intangible assets:

Schedule of Estimate of Future Amortization for Other Intangible

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Property and Equipment

3 unchanged sentences

Furniture and equipment

Property, Plant and Equipment, Gross

Property, plant and equipment,

Less accumulated depreciation

2 unchanged sentences

expense for the years ended December 31, 2022 and 2021 was $ 2,496,906 and $ 1,935,613 , respectively.

Property and equipment are stated

at cost and are depreciated over their estimated useful lives, primarily using the straight-line method.

During 2021, the Company reclassified

1 unchanged sentence

to real estate held for investment.

During 2020, the Company demolished a building with a gross building cost of $ 1,723,000 with its

associated accumulated depreciation (net book value of $- 0 -) and transferred land with a cost of $ 1,516,700 to real estate held for investment

to make way for phase 2 of the redevelopment and expansion of Center53.

See Note 20 for additional information regarding property and

equipment acquired through acquisitions.

See Note 20 for additional information regarding property and equipment acquired through acquisitions.

NATIONAL FINANCIAL CORPORATION

4 unchanged sentences

Summary of Bank Loans Payable

4.27 % fixed note payable in monthly installments of $ 53,881 including principal and

interest, collateralized by shares of Security National Life Insurance Company stock, paid in full December 2021.

Prime rate note payable in monthly installments of $ 75,108 including principal and interest,

collateralized by shares of Security National Life Insurance Company stock, due December 2024.

4.329 % fixed note payable in monthly installments of $ 9,775 including principal and interest,

collateralized by real property with a book value of approximately $ 3,103,000 , due September 2025.

4.00 % variable with LIBOR at a 1 % floor and a spread at 3 % rate construction loan collateralized by

real property with a book value of approximately $ 64,730,000 , due March 2024.

2.5 % above the monthly LIBOR rate plus 1/16th of the monthly LIBOR rate construction loan payable in

monthly principal payments of $ 113,000 plus interest, collateralized by real property with a book value of approximately

$ 49,118,000 , paid in full March 2021.

3.30 % fixed note payable in monthly installments of $ 179,562 including principal and interest,

collateralized by real property with a book value of approximately $ 49,118,000 , due April 2051.

Prime rate note payable in monthly installments of $ 75,108 including principal and interest,collateralized by shares of Security National Life Insurance Company stock, due December 2024.

4.329 % fixed note payable in monthly installments of $ 9,775 including principal and interest,collateralized by real property with a book value of approximately $ 3,023,000 , paid in full April 2022.

4.00 % variable with LIBOR at a 1 % floor and a spread at 3 % rate construction loan collateralized by real property with a book value of approximately $ 65,422,000 , paid off with long term financing in May 2022.

3.85 % fixed note payable in monthly installments of $ 243,781 including principal and interest, collateralized by real property with a book value of approximately $ 65,422,000 , due June 2032.

3.30 % fixed note payable in monthly installments of $ 179,562 including principal and interest, collateralized by real property with a book value of approximately $ 46,960,000 , due April 2031.

4.7865 % fixed interest only note payable in monthly installments, collateralized by real property with

a book value of approximately $ 16,948,000 , due June 2028.

1 month LIBOR rate plus 2.1 % loan purchase agreement with a warehouse line availability of

$ 100,000,000 , matures June 2022.

1 month LIBOR rate plus 2 % loan purchase agreement with a warehouse line availability of $ 100,000,000 ,

matures August 2022.

1 month LIBOR rate plus 2.15 % loan purchase agreement with a warehouse line availability of

$ 75,000,000 , matures May 2022.

1 month LIBOR rate plus 2.0 % loan purchase agreement with a warehouse line availability of

$ 100,000,000 , matures June 2022.

1 month LIBOR rate plus 2.5 % loan purchase agreement with a warehouse line availability of $ 5,000,000 ,

matured August 2021.

1 month SOFR rate plus 2.1 % loan purchase agreement with a warehouse line availability of $ 100,000,000 , matures June 2023.

1 month SOFR rate plus 2 % loan purchase agreement with a warehouse line availability of $ 100,000,000 , matures November 2023.

1 month SOFR rate plus 2.5 % loan purchase agreement with a warehouse line availability of $ 75,000,000 , matures May 2023.

1 month SOFR rate plus 2.1 % loan purchase agreement with a warehouse line availability of $ 50,000,000 , matures June 2023.

Other short-term borrowings (1)

4 unchanged sentences

Bank and other loans, excluding current installments

Revolving Line of Credit

(1) Revolving Line

NATIONAL FINANCIAL CORPORATION

16 unchanged sentences

investment in FHLB stock was $ 856,800 compared with $ 826,800 at December 31, 2021.

The Company’s increased investment in FHLB stock

was a result of its increase in short-term FHLB borrowings during 2021.

At December 31, 2021, the Company was contingently liable under

a standby letter of credit aggregating $ 443,758 , to be used as collateral to cover any contingency related to additional risk assessments

pertaining to the Company’s captive insurance program.

At December 31, 2022, the Company was contingently

liable under standby letters of credit aggregating $ 968,903 , $ 443,758 to be used as collateral to cover any contingency related to additional

risk assessments pertaining to the Company’s captive insurance program and $ 525,145 for land developments.

Home Loan Bank of Dallas

December 31, 2021, the amount available for borrowings from the FHLB of Dallas was approximately $ 7,794,625 , compared with $- 0 - at December

Mortgage-Backed fixed maturity securities with an estimated fair value of $ 8,774,352 at December 31, 2021 have been pledged

at the FHLB of Dallas as collateral for current and potential borrowings compared with $- 0 - at December 31, 2020.

December 31, 2022, the amount available for borrowings from the FHLB of Dallas was approximately $ 5,719,671 , compared with $ 7,794,625

at December 31, 2021.

and 2020, the Company had no outstanding FHLB borrowings.

At December 31, 2021, the Company’s total investment in FHLB stock was

$ 1,720,300 compared with $ 1,720,300 at December 31, 2020.

Mortgage-Backed fixed maturity securities with an estimated fair value of $ 6,696,100 at December 31, 2022 have

been pledged at the FHLB of Dallas as collateral for current and potential borrowings compared with $ 8,774,352 at December 31, 2021.

At December 31, 2022 and 2021, the Company had no outstanding FHLB borrowings.

At December 31, 2022, the Company’s total investment

in FHLB stock was $ 1,743,500 compared with $ 1,720,300 at December 31, 2021.

Lines of Credit

Company has a $ 2,000,000 revolving line-of-credit with a bank with interest payable at the prime rate minus .75%, secured by the capital

stock of Security National Life and maturing December 31, 2022 , renewable annually.

At December 31, 2021, the Company was contingently

liable under standby letters of credit aggregating $ 941,711 , to be used as collateral for residential subdivision land developments.

Company has a $ 2,000,000 revolving line-of-credit with a bank with interest payable at the prime rate plus 1.25 % with a 3 % prime floor,

secured by the capital stock of Security National Life and maturing December 31, 2023 , renewable annually.

At December 31, 2022, the

Company was contingently liable under standby letters of credit aggregating $ 622,293 , to be used as collateral for residential subdivision

land developments.

The standby letters of credit will draw on the line of credit if necessary.

The Company does not expect any material losses to result

from the issuance of the standby letters of credit.

As of December 31, 2021, there were no amounts outstanding under the revolving line-of-credit.

Company also has a $ 2,500,000 revolving line-of-credit with a bank with interest payable at the overnight LIBOR rate plus 2.25 % maturing

December 31, 2022 .

As of December 31, 2021, there was $ 1,250,000 outstanding under the revolving line-of-credit.

The Company does not expect any material

losses to result from the issuance of the standby letters of credit.

As of December 31, 2022, there were no amounts outstanding under

the revolving line-of-credit.

Company also has a $ 2,500,000 revolving line-of-credit with a bank with interest payable at the daily simple SOFR plus 2.35 %, which includes

a mandatory .10% credit spread adjustment, maturing December 31, 2023 .

As of December 31, 2022, there were no amounts outstanding under

the revolving line-of-credit.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Bank and Other Loans Payable (Continued)

Covenants for Mortgage Warehouse Lines of Credit

1 unchanged sentence

The agreement

charges interest at the 1-Month LIBOR rate plus 2.1 % and matures on June 9, 2022 .

charges interest at the 1-Month SOFR rate plus 2.1% and matures on June 2, 2023 .

SecurityNational Mortgage is required to comply with

1 unchanged sentence

liquidity overhead coverage ratio, and a quarterly gross profit of at least $ 1.00 .

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Bank and Other Loans Payable (Continued)

Company, through its subsidiary SecurityNational Mortgage, has a line of credit with Texas Capital Bank N.A.

2 unchanged sentences

The agreement charges

interest at the 1-Month LIBOR rate plus 2 % and matures on August 9, 2022 .

interest at the 1-Month SOFR rate plus 2% and matures on November 9, 2023 .

The Company is required to comply with covenants for adjusted

5 unchanged sentences

The agreement charges interest

at the 1-Month LIBOR rate plus 2.15 % and matures on May 27, 2022 .

at the 1-Month SOFR rate plus 2.50% and matures on May 26, 2023 .

The Company is required to comply with covenants for adjusted tangible

4 unchanged sentences

Mortgage to borrow up to $ 50,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month LIBOR

rate plus 2.0 % and matures on June 4, 2022 .

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.

The agreement charges interest at 2.10% plus the

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

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

4 unchanged sentences

$ 161,712,804

$ 251,286,927

expense in 2022 and 2021 was $ 7,830,443 and $ 7,127,516 , respectively.

4 unchanged sentences

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

Perpetual Care Trust Investments and Obligation

law requires the Company to pay into endowment care trusts a portion of the proceeds from the sale of certain cemetery property interment

6 unchanged sentences

amount recorded as Cemetery Perpetual Care Obligation in the accompanying consolidated balance sheets .

components of the cemetery perpetual care investments and obligation are as follows:

Schedule of The Components of The Cemetery Perpetual Care Obligation

Cash and cash equivalents

components of the cemetery perpetual care investments and obligation as of December 31, 2022 are as follows:

of Investments

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2022:

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Participating interests in residential construction mortgage loans held for investment with Security National Life

Common stock:

Industrial, miscellaneous and all other

$ ( 175,163 )

Total equity securities at estimated fair value

$ ( 175,163 )

Mortgage loans held for investment at amortized cost:

Residential construction

Real estate held for investment:

Cash and cash equivalents

Total cemetery perpetual care trust investments

1 unchanged sentence

$ ( 5,099,542 )

Trust investments in excess of trust obligations

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

components of the cemetery perpetual care investments and obligation as of December 31, 2021 are 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:

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

Total equity securities at estimated fair value

Mortgage loans held for investment at amortized cost:

Residential construction

Real estate held for investment:

Cash and cash equivalents

Total cemetery perpetual care trust investments

Cemetery perpetual care obligation

$ ( 4,915,285 )

Trust investments in excess of trust obligations

Maturity Securities

following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at December 31,

2022 and at December 31, 2021.

The unrealized losses were primarily related to interest rate fluctuations and inflation.

The tables set

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

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

At December 31, 2022

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Total unrealized losses

At December 31, 2021

Obligations of states and political subdivisions

Total unrealized losses

were 5 securities with fair value of 96.4 % of aggregate amortized cost at December 31, 2022.

There were 2 securities with fair value

of 99.1 % of aggregate amortized cost at December 31, 2021.

No credit losses have been recognized for the years ended December 31, 2022

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

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31,

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.

Schedule of Investments Classified by Contractual

Maturity Date

Estimated Fair

Due in 1 year

Due in 2-5 years

Due in 5-10 years

Due in more than 10 years

Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection

5 unchanged sentences

These restricted cash items are for the Company’s life insurance and mortgage segments.

assets are summarized as follows:

assets as of December 31, 2022 are summarized as follows:

Schedule of Restricted Assets in Cemetery and Mortuary Endowment Care and Pre need Merchandise Funds

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2022:

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

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

$ ( 310,165 )

Total equity securities at estimated fair value

$ ( 310,165 )

Mortgage loans held for investment at amortized cost:

Residential construction

Cash and cash equivalents (1)

Total restricted assets

(1) Including cash

and cash equivalents of $ 8,527,620 for the life insurance and mortgage segments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

assets 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:

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Participating interests in mortgage loans held for investment with Security

National Life

Including cash and cash equivalents of $ 7,869,295 and $ 852,499 as of December 31, 2021 and 2020, respectively, for the life insurance and mortgage segments.

surplus note receivable in the amount of $ 4,000,000 at

December 31, 2021 and 2020, from Security National Life,

was eliminated in consolidation.

Notes 1 and 17 for additional information regarding restricted assets.

Common stock:

Industrial, miscellaneous and all other

Total equity securities at estimated fair value

Mortgage loans held for investment at amortized cost:

Residential construction

Cash and cash equivalents (1)

Total restricted assets

(1) Including cash

and cash equivalents of $ 7,869,295 for the life insurance and mortgage segments.

surplus note receivable in the amount of $ 4,000,000 at December 31, 2022 and 2021, from Security National Life, was eliminated in consolidation.

Maturity Securities

following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at December 31,

2022 and at December 31, 2021.

The unrealized losses were primarily related to interest rate fluctuations and inflation.

The tables set

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

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

At December 31, 2022

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

At December 31, 2021

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

were 17 securities with fair value of 98.2 % of aggregate amortized cost at December 31, 2022.

There were 4 securities with fair value

of 99.4 % of aggregate amortized cost at December 31, 2021.

No credit losses have been recognized for the years ended December 31, 2022

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

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2022 and 2021

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31,

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.

Schedule of Investments Classified by Contractual

Maturity Date

Estimated Fair

Due in 1 year

Due in 2-5 years

Due in 5-10 years

Due in more than 10 years

Notes 1, 2 and 17 for additional information regarding restricted assets and cemetery perpetual care trust investments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Company’s income tax liability is summarized as follows:

7 unchanged sentences

Loan loss reserve

( 5,352,942 )

Unearned premium

4 unchanged sentences

Deposit obligations

Tax on unrealized appreciation

( 2,590,726 )

19 unchanged sentences

Total Current Income Tax Expense (Benefit)

( 7,400,620 )

( 2,553,385 )

Total Deferred Income Tax

Expense (Benefit)

( 9,954,005 )

reconciliation of income tax expense at the U.S.

4 unchanged sentences

Change in valuation allowance

( 1,477,474 )

Income tax expense

2 unchanged sentences

effective tax rates differ from the U.S.

federal statutory rate of 21 % partially due to its provision for state income taxes and a decrease

to the valuation allowance.

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

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 and an increase

to the valuation allowance related to Kilpatrick Life Insurance Company.

The increase in the effective tax rate when compared to the

prior year is partially due to an increase to the valuation allowance in the current period when compared to the prior period year.

December 31, 2022, the Company had no significant unrecognized tax benefits.

15 unchanged sentences

The Company is liable for these amounts in the event such reinsurers are unable to pay their portion of the claims.

Company has also assumed insurance from other companies having insurance in force amounting to approximately $ 129,000,000 and approximately

$ 96,000,000 at December 31, 2021 and 2020, respectively.

See Financial Statement Schedule IV for information regarding premiums for direct

business, reinsurance assumed and reinsurance ceded.

Company evaluates the financial condition of reinsurers and monitors the concentration of credit risk.

The Company had a significant

concentration of credit risk with a single reinsurer of 93.7 % and 93.6 % of ceded life insurance in force as of December 31, 2022 and

2021, respectively.

This represented approximately 11.3 % and 11.9 % of the Company’s total life insurance in force as of December

31, 2022 and 2021, respectively.

The Company has also assumed insurance from other companies.

See Financial Statement Schedule IV for

information regarding life insurance in force and premiums for reinsurance.

Loan Loss Settlements

5 unchanged sentences

The Company believes that the loan loss reserve as of December 31, 2022, represents its best estimate for adequate loss reserves on loans

Loan Loss Litigation

Agreement and Mutual Release with Lehman Brothers Holdings Inc.

2004 to early 2008, SecurityNational Mortgage Company (“SecurityNational Mortgage”), a wholly owned subsidiary of the Company,

originated “limited documentation” or “reduced documentation” loans which were sold to certain affiliates of

Lehman Brothers Holdings Inc.

(“Lehman Holdings”).

Certain of these loans became the subject of disputes between SecurityNational

Mortgage and Lehman Holdings and certain Lehman Holdings affiliates.

Lehman Holdings filed a Petition for Relief under Chapter 11 of

the United States Bankruptcy Code in 2008.

In May of 2011, SecurityNational Mortgage filed a complaint in U.S.

District Court against

certain Lehman Holdings affiliates.

In June of 2011, Lehman Holdings filed a complaint in Federal District Court against SecurityNational

Mortgage, both the complaint filed in May 2011 and that filed in June 2011 were later resolved.

In 2016, certain other pending loan disputes

between SecurityNational Mortgage and Lehman Holdings became the subject of an unsuccessful, non-binding alternate dispute resolution

mediation proceeding.

in 2016, Lehman Holdings filed an adversary proceeding complaint against approximately 150 mortgage loan originators, including SecurityNational

Mortgage, in the U.S.

Bankruptcy Court of the Southern District of New York, which included seeking damages relating to the alleged obligations

of the defendants under indemnification provisions of alleged agreements, in amounts to be determined at trial, including interest, attorneys’

fees and costs incurred by Lehman Holdings in enforcing the obligations of the defendants.

The complaint was later amended with the latest

amended complaint filed against SecurityNational Mortgage on December 27, 2016, seeking damages to be determined at trial, including

interest, attorneys’ fees and costs.

This complaint involved approximately 135 mortgage loans, there being millions of dollars

allegedly in dispute.

These claims against SecurityNational Mortgage were asserted as a result of Lehman Holdings’ earlier settlements

with the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Corporation (“Freddie Mac”).

2018, Lehman Holdings filed a separate adversary proceeding complaint against SecurityNational Mortgage.

This adversary proceeding allegedly

involved approximately 577 mortgage loans relative to private securitization trusts (“RMBS Loans”) and millions of dollars

Thereafter, Lehman Holdings made a filing that effectively reduced the number of RMBS Loans to 248.

This proceeding was in

addition to the above-referenced proceeding involving the Fannie Mae and Freddie Mac mortgage loans.

As with the above-referenced proceeding,

damages were sought including interest, costs, and attorneys’ fees.

SecurityNational Mortgage, as well as other defendants, have been involved in written discovery, and production of documents relative

to the cases, and the filing of motions.

The deposition phase of the cases was yet to begin, as well as the later expert witness phase.

Those phases would require substantial expenditures of legal fees and costs.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Reinsurance, Commitments and Contingencies (Continued)

February 1, 2021, SecurityNational Mortgage executed a settlement agreement with Lehman Holdings in relation to these 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.

Non-Cancelable

31 unchanged sentences

claims in the consolidated financial statements.

Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings,

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

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2022 and 2021

Reinsurance, Commitments and Contingencies (Continued)

Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings,

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

Retirement Plans

Company and its subsidiaries had a noncontributory Employee Stock Ownership Plan (“ESOP”) for all eligible employees.

employees are primarily those with more than one year of service, who work in excess of 1,000 hours per year.

Contributions, which may

be in cash or stock of the Company, are determined annually by the Board of Directors.

The Company’s contributions are allocated

to eligible employees based on the ratio of each eligible employee’s compensation to total compensation for all eligible employees

during each year.

The Company did not make any contributions for the years ended December 31, 2021 and 2020.

On November 25, 2019, the

Company distributed a notice of intent to terminate the ESOP Plan to all current plan participants.

The Company also filed Form 5310

application for determination for terminating plan, with the IRS on December 6, 2019.

As of the 4 th quarter of 2020, the Company

began to distribute the ESOP Plan assets to participants that had made a distribution election.

The Company received approval of its

application from the IRS and distributed all the remaining ESOP Plan assets to the participants during 2021.

November 25, 2019, the Company distributed a notice of intent to terminate the ESOP Plan to all current plan participants.

also filed Form 5310 application for determination for terminating plan, with the IRS on December 6, 2019.

As of the 4 th quarter

of 2020, the Company began to distribute the ESOP Plan assets to participants that had made a distribution election.

The Company received

approval of its application from the IRS and distributed all the remaining ESOP Plan assets to the participants during 2021.

Company has three 401(k) savings plans covering all eligible employees which includes employer participation in accordance with the provisions

18 unchanged sentences

December 2, 2022, the Board members approved a motion to extend the Chief Executive Officer’s employment agreement, dated December

4, 2012, for an additional four-year term ending December 2022.

4, 2012, for an additional two-year term ending December 2024.

In the event of disability, the Chief Executive Officer’s salary

10 unchanged sentences

the remaining benefits are to be paid to his heirs.

The Company expensed $ 900,000 and $ 900,000 during the years ended December 31, 2021

and 2020, respectively, to cover the present value of anticipated retirement benefits under the employment agreement.

The Company expensed nil and $ 900,000 during the years ended December 31, 2022 and

2021, respectively, to cover the present value of anticipated retirement benefits under the employment agreement.

The liability accrued

18 unchanged sentences

Capital Stock

Company has one class of preferred stock of $ 1.00 par value, 5,000,000 shares authorized, of which no ne are issued.

Company has one class of preferred stock of $ 1.00 par value, 5,000,000 shares authorized, of which none are issued.

The preferred stock

4 unchanged sentences

Class C shares are convertible into Class A shares at any time on a one to one ratio.

The decrease in treasury stock was the result of

treasury stock being used to fund the company’s 401(k) and deferred compensation plans.

of both Class A and Class C common stock have received 5% stock dividends in the years 1990 through 2019, a 7.5% stock dividend in the

year 2020, and a 5% stock dividend in the year 2021, as authorized by the Company’s Board of Directors.

Company has Class B common stock of $ 1.00 par value, 5,000,000 shares authorized, of which no ne are issued.

year 2020, and a 5% stock dividend in the years 2021 and 2022, as authorized by the Company’s Board of Directors.

Company has Class B common stock of $ 1.00 par value, 5,000,000 shares authorized, of which none are issued.

Class B shares are non-voting

23 unchanged sentences

Employee stock options

Unvested restricted stock units

Dilutive potential common shares

3 unchanged sentences

Diluted earnings per share

the years ended December 31, 2021 and 2020, there were 50,000 and - 0 - of 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.

the years ended December 31, 2022 and 2021, there were 339,150 and 50,000 of 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.

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

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Stock Compensation Plans

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

Compensation expense for options

issued of $ 118,384 and $ 358,878 has been recognized under these plans for the years ended December 31, 2021 and 2020, respectively, and

is included in personnel expenses on the consolidated statements of earnings.

As of December 31, 2021, the total unrecognized compensation

expense related to the options issued was $ 875,735 , which is expected to be recognized over the vesting period of one year.

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

Company has three stock compensation plans (the “2013 Plan”, the “2014 Director Plan” and the “2022 Equity

Incentive Plan”).

based compensation expense for stock options issued of $ 929,321 and $ 118,384 has been recognized under these plans for the years ended

December 31, 2022 and 2021, respectively, and is included in personnel expenses on the consolidated statements of earnings.

As of December

31, 2022, the total unrecognized compensation expense related to the stock options issued was $ 506,701 , which is expected to be recognized

over the vesting period.

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

The Company estimates

4 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.

following table summarizes the assumptions used in estimating the fair value of each option granted along with the weighted-average fair

value of the options granted.

following table summarizes the assumptions used in estimating the fair value of each stock option granted along with the weighted-average

fair value of the stock options granted.

Schedule of Assumptions Used

6 unchanged sentences

December 2, 2022

March 27, 2020

December 3, 2021

(1) Stock dividend

16 unchanged sentences

Available options for future grant

Weighted average contractual term of options outstanding at December 31, 2021

Weighted average contractual term of options exercisable at December 31, 2021

Weighted average contractual term of options

outstanding at December 31, 2022

Weighted average contractual term of options

exercisable at December 31, 2022

Aggregated intrinsic value of options outstanding at December 31, 2022 (1)

Aggregated intrinsic value of options exercisable at December 31, 2022 (1)

The Company used a stock price of $ 9.20 as of December 31,

2021 to derive intrinsic value.

(1) The Company used

a stock price of $ 7.30 as of December 31, 2022 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

3 unchanged sentences

Ended December 31, 2022 and 2021

Stock Compensation Plans (Continued)

Stock Units (“RSUs”)

based compensation expense for RSUs issued of $ 371 and nil has been recognized under these plans for the years ended December 31, 2022

and 2021, respectively, and is included in personnel expenses on the consolidated statements of earnings.

As of December 31, 2022, the

total unrecognized compensation expense related to the RSUs issued was $ 742 , which is expected to be recognized over the vesting period

of three months.

The fair value of each RSU granted is determined based on the Company’s stock price on the date of grant.

weighted average grant date fair value of RSUs granted on December 2, 2022 was $ 6.48 .

of the RSUs is summarized as follows:

Schedule of Activity Restricted Stock Units

Class A Shares

Weighted Average Grant Date Fair Value

Non-vested at December 31, 2021

Non-vested at December 31, 2022

Available RSUs for future grant

Aggregated intrinsic value of RSUs outstanding at December 31, 2022 (1)

(1) The Company used

a stock price of $ 7.30 as of December 31, 2022 to derive intrinsic value.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Statutory Financial Information and Dividend Limitations

24 unchanged sentences

Trans-Western Life Insurance Company

Utah, Louisiana, Mississippi and Texas Insurance Departments impose minimum risk-based capital (RBC) requirements that were developed

by the NAIC on insurance enterprises.

The formulas for determining the RBC specify various factors that are applied to financial balances

or various levels of activity based on the perceived degree of risk.

Regulatory compliance is determined by a ratio (the Ratio) of the

enterprise’s regulatory total adjusted capital, as defined by the NAIC, to its authorized control level, as defined by the NAIC.

Enterprises below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective

The life insurance subsidiaries each have a ratio that is greater than the first level of regulatory action as of December 31,

Utah, Louisiana, Mississippi and Texas Insurance Departments impose minimum risk-based capital (“RBC”) requirements that

were developed by the NAIC on insurance enterprises.

The formulas for determining the RBC specify various factors that are applied to

financial balances or various levels of activity based on the perceived degree of risk.

Regulatory compliance is determined by a ratio

(the Ratio) of the enterprise’s regulatory total adjusted capital, as defined by the NAIC, to its authorized control level, as

defined by the NAIC.

Enterprises below specific trigger points or ratios are classified within certain levels, each of which requires

specified corrective action.

The life insurance subsidiaries each have a ratio that is greater than the first level of regulatory action

as of December 31, 2022.

The Company does not have any guarantees to maintain the capital and surplus of any affiliates except for the Company’s

agreement to provide additional capital to Security National Life Insurance Company in the event risk-based capital drops below 350% of

the authorized control level.

the net assets of the life insurance subsidiaries available for transfer to the Company are limited to the amounts of the life insurance

76 unchanged sentences

Net investment income

Gains on investments and other assets

Gains (losses) on investments and other assets

Other than temporary impairments

20 unchanged sentences

Earnings before income taxes

Income tax benefit (expense)

Income tax expense

( 4,034,979 )

16 unchanged sentences

$ 263,418,230

$ 387,670,116

Net investment income

22 unchanged sentences

Earnings before income taxes

Income tax benefit (expense)

Income tax expense

( 2,943,715 )

26 unchanged sentences

Quoted prices for similar assets or liabilities in active markets;

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

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

Quoted prices for identical or similar assets or liabilities

in non-active markets;

Valuation 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

8 unchanged sentences

For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing

services, or in the case of private placements (considered Level 3 investments), are estimated by discounting expected future cash flows

using a current market value applicable to the coupon rate, credit and maturity of the investments.

services, or in the case of private placements (considered Level 3 financial assets), are estimated by discounting expected future cash

flows using a current market value applicable to the coupon rate, credit and maturity of the investments.

The fair values for equity securities are based on quoted market prices.

Held for Sale :

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

The fair value is based on quoted market prices,

when available.

When a quoted market price is not readily available, the Company uses the market price from its last sale of similar

NATIONAL FINANCIAL CORPORATION

18 unchanged sentences

items shown under Level 3 are valued as follows:

Held for Sale :

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

The fair value is based on quoted market prices,

when available.

When a quoted market price is not readily available, the Company uses the market price from its last sale of similar

Commitments and Forward Sale Commitments :

31 unchanged sentences

matching the income from the investment in rental properties with the funds required for future estimated policy claims.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2022 and 2021

Fair Value of Financial Instruments (Continued)

should be noted that for replacement cost, when determining the fair value of real estate held for investment, the Company uses a provider

4 unchanged sentences

considers area comparable properties and property condition when determining fair value.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2021 and 2020

Fair Value of Financial Instruments (Continued)

addition to this analysis performed by the Company, the Company depreciates Real Estate Held for Investment.

10 unchanged sentences

Significant Unobservable Inputs

Assets accounted for at fair value on a

recurring basis

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

8 unchanged sentences

Derivatives - loan commitments (3)

Total assets accounted for at fair value on a

recurring basis

Total assets accounted for at fair value on a recurring basis

$ 513,235,939

1 unchanged sentence

$ 146,704,995

Liabilities accounted for at fair value on a

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

3 unchanged sentences

( 1,382,979 )

Total liabilities accounted for at fair value

on a recurring basis

Total liabilities accounted for at fair value on a recurring basis

$ ( 1,426,582 )

$ ( 1,382,979 )

Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

(2) Equity securities

Included in other assets on the consolidated balance sheets

Included in other liabilities and accrued expenses on the consolidated

balance sheets

(3) Included in other

assets on the consolidated balance sheets

(4) Included in other

liabilities and accrued expenses on the consolidated balance sheets

NATIONAL FINANCIAL CORPORATION

4 unchanged sentences

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

Quoted Prices in Active Markets

for Identical Assets

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

12 unchanged sentences

Derivatives - loan commitments (3)

Total assets accounted for at fair value on a

recurring basis

Total assets accounted for at fair value on a recurring basis

$ 591,517,009

1 unchanged sentence

$ 313,363,585

Liabilities accounted for at fair value on a

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

Derivatives - put options (4)

Derivatives - loan commitments (4)

1 unchanged sentence

( 1,547,895 )

Total liabilities accounted for at fair value

on a recurring basis

Total liabilities accounted for at fair value on a recurring basis

$ ( 1,603,324 )

$ ( 1,547,895 )

Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

(2) Equity securities

Included in other assets on the consolidated balance sheets

Included in other liabilities and accrued expenses on the consolidated

balance sheets

(3) Included in other

assets on the consolidated balance sheets

(4) Included in other

liabilities and accrued expenses on the consolidated balance sheets

Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2022, the significant unobservable inputs

33 unchanged sentences

Pricing quotes

is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:

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

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

Net Derivatives

Loans Held for

Fixed Maturity Securities

Available for Sale

Net Derivatives Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - December 31, 2021

5 unchanged sentences

Transfer to mortgage loans held for investment

( 51,691,213 )

Total gains (losses):

5 unchanged sentences

$ 141,179,620

As a component of mortgage fee income on the consolidated statements

As a component of net investment income on the consolidated

statements of earnings

is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:

Net Derivatives

Loans Held for

Fixed Maturity Securities

Available for Sale

(1) As a component

of mortgage fee income on the consolidated statements of earnings

(2) As a component

of net investment income on the consolidated statements of earnings

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

Net Derivatives Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - December 31, 2020

4 unchanged sentences

( 5,900,076,766 )

( 1,042,400 )

Transfer to mortgage loans held for investment

( 16,960,549 )

Total gains (losses):

5 unchanged sentences

$ 302,776,827

As a component of mortgage fee income on the consolidated statements

As a component of net investment income on the consolidated

statements of earnings

(1) As a component

of mortgage fee income on the consolidated statements of earnings

(2) As a component

of net investment income on the consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Fair Value of Financial Instruments (Continued)

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

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

by their classification in the consolidated balance sheet at December 31, 2022.

Schedule of Fair Value Assets Measured on a Nonrecurring Basis

Quoted Prices in Active Markets

for Identical

Significant Observable

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a nonrecurring basis

Assets accounted for at fair value on a

nonrecurring basis

Impaired mortgage loans held for investment

Impaired real estate held for sale

Total assets accounted for at fair value on a nonrecurring basis

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

Total assets accounted for at fair value on

a nonrecurring basis

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

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

Quoted Prices in Active Markets

for Identical

Significant Observable

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a nonrecurring basis

Assets accounted for at fair value on a

nonrecurring basis

Impaired mortgage loans held for investment

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 basis

NATIONAL FINANCIAL CORPORATION

37 unchanged sentences

( 126,078,031 )

Included in other investments and policy loans on the consolidated

balance sheets

Mortgage loans held for investment

Included in future policy benefits and unpaid claims on the

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

NATIONAL FINANCIAL CORPORATION

7 unchanged sentences

Mortgage loans held for investment

$ 100,384,283

Residential construction

19 unchanged sentences

( 116,215,717 )

Included in other investments and policy loans on the consolidated

balance sheets

Mortgage loans held for investment

Included in future policy benefits and unpaid claims on the

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 financial instruments are summarized

44 unchanged sentences

$ ( 39,493,861 )

$ ( 7,323,241 )

Amounts reclassified into net earnings

3 unchanged sentences

( 31,072,032 )

( 5,149,010 )

Unrealized gains on restricted assets (1)

Unrealized gains on cemetery perpetual care trust investments (1)

Unrealized gains before taxes

Unrealized gains for foreign currency translations adjustments

1 unchanged sentence

$ ( 31,140,725 )

Fixed maturity securities available for sale

$ ( 5,172,685 )

(1) Fixed maturity

securities available for sale

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2022 and 2021

Accumulated Other Comprehensive Income (Continued)

following is the accumulated balances of other comprehensive income as of December 31, 2022:

Schedule of Accumulated Balances of Other Comprehensive Income

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

Beginning Balance December 31, 2021

Change for the period

Ending Balance December 31,

Unrealized gains (losses) on fixed maturity securities

available for sale

$ ( 31,072,032 )

$ ( 13,050,767 )

Unrealized gains (losses) on restricted assets (1)

1 unchanged sentence

care trust investments (1)

Foreign currency translation adjustments

Other comprehensive income

$ ( 31,140,725 )

Fixed maturity securities available for sale

$ ( 13,070,277 )

(1) Fixed maturity

securities available for sale

following is the accumulated balances of other comprehensive income as of December 31, 2021:

Unrealized gains on fixed maturity securities available for sale

Unrealized gains on restricted assets (1)

Beginning Balance December 31, 2020

Change for the period

Ending Balance December 31, 2021

Unrealized gains (losses) on fixed maturity securities

available for sale

$ ( 5,149,010 )

Unrealized gains (losses) on restricted assets (1)

Unrealized gains (losses) on cemetery perpetual

2 unchanged sentences

Other comprehensive income

Fixed maturity securities available for sale

$ ( 5,172,685 )

(1) Fixed maturity

securities available for sale

NATIONAL FINANCIAL CORPORATION

12 unchanged sentences

Asset Fair Value

Liability Fair

Liability Fair Value

Derivatives not designated as hedging instruments:

16 unchanged sentences

$ ( 4,308,638 )

$ ( 3,113,095 )

Call and put options

12 unchanged sentences

Pursuant to the Asset Purchase Agreement, Memorial Estates, Inc.

to use $ 70,000 of the holdback amount to pay, perform and discharge when due, trade accounts payable of Rivera Funerals, Cremations and

Memorial Gardens to third parties that remained unpaid.

Unapplied portions of the remaining $ 1,050,000 holdback amount are to be released

and paid by Memorial Estates Inc.

in annual payments of up to $ 105,000 each, beginning on the first anniversary date of the closing date

and continuing thereafter on the anniversary dates of the closing date.

$ 70,000 of the holdback amount to pay trade accounts payable of Rivera Funerals, Cremations and Memorial Gardens to third parties that

remained unpaid at the time of purchase.

The remaining $ 1,050,000 holdback amount is to be released and paid by Memorial Estates Inc.

in annual payments of up to $ 105,000 each, beginning in January 2023.

estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition were as follows:

12 unchanged sentences

of cash and $ 579,006 of fixed maturity securities, available for sale, at estimated fair value which is a Level 2 asset in the fair value

estimated fair value which is a Level 3 asset in the fair value hierarchy

(2) At estimated fair

value which is a Level 3 asset in the fair value hierarchy

(3) Including $ 2,310,000

15 unchanged sentences

Fair value of net assets acquired/consideration paid

At estimated fair value which is a Level 3 asset in

the fair value hierarchy

Mortuary’s revenues and net loss since the date of acquisition for the year ended December 31, 2021 were $- 0 - and $ ( 98,531 ) , respectively.

(1) At estimated fair

value which is a Level 3 asset in the fair value hierarchy

Mortuary’s revenues and net loss since the date of acquisition for the year ended December 31, 2021 were nil and $ ( 98,531 ) , respectively.

NATIONAL FINANCIAL CORPORATION

4 unchanged sentences

following table presents the MSR activity.

Schedule of Mortgage Servicing Rights

of Mortgage Servicing Rights

Amortized cost:

4 unchanged sentences

( 14,851,880 )

Application of valuation allowance to write down MSRs

with other than temporary impairment

( 51,185,906 )

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

Balance before valuation allowance at year end

1 unchanged sentence

Balance at beginning of year

Application of valuation allowance to write down MSRs

with other than temporary impairment

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

Balance at year end

10 unchanged sentences

Therefore, the following estimates will change in a manner and amount not presently determinable by management.

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

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

Estimated MSR Amortization

5 unchanged sentences

statements of earnings.

Schedule of Other Revenues

of Other Revenues

Years Ended December 31

1 unchanged sentence

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

Summary of Unpaid Principal Balances of the Servicing Portfolio

of Unpaid Principal Balances of the Servicing Portfolio

Servicing UPB

2 unchanged sentences

following key assumptions were used in determining MSR value.

Assumptions Used in Determining MSR Value

of Assumptions Used in Determining MSR Value

December 31, 2022

December 31, 2021

October 31, 2022, the Company sold certain of its MSRs.

The MSRs related to mortgage loans previously originated by the Company in aggregate

unpaid principal amount of approximately $ 7.02 billion.

As a result of the sale, the book value of the Company’s MSRs decreased

$ 51,185,906 and generated a gain of $ 34,051,938 included in mortgage fee income on the consolidated statements of earnings.

Substantially

all of the consideration was received by the Company with the remainder subject to certain holdbacks during transfer of the MSRs.

Company completed the physical transfer of files prior to its deadline and anticipates the release of the holdbacks in the first quarter

NATIONAL FINANCIAL CORPORATION

24 unchanged sentences

$ 848,424,085

Net unpaid claims

following table provides a rollforward of the Company’s liability for reported but unpaid claims and incurred but not reported

claims, net of the related receivable from reinsurers.

of Liability for Reported but Unpaid Claims and Incurred but not Reported

Accident and Health

Balance at 12/31/2020

63,247,616 (1)

14,036,473 (2)

( 65,518,834 )

( 14,469,536 )

( 80,131,261 )

Balance at 12/31/2021

59,377,962 (1)

13,987,576 (2)

( 57,988,800 )

( 14,016,502 )

( 72,133,550 )

Balance at 12/31/2022

(1) See death benefits

on the consolidated statements of earnings

(2) Included in increase

in future benefits on the consolidated statements of earnings

(3) Included in surrender

and other policy benefits on the consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION

28 unchanged sentences

from the customer through regular monthly payments.

As of December 31, 2021 and 2020, the balances were $- 0 - and $- 0 -, respectively.

Deferred pre-need land revenue is not placed in trust.

As of December 31, 2022 and 2021, the balances were nil and nil , respectively.

pre-need land revenue is not placed in trust.

payment of the contract does not constitute fulfillment of the performance obligation.

63 unchanged sentences

following table disaggregates revenue for the Company’s cemetery and mortuary contracts.

Revenues of the Cemetery and Mortuary Contracts

of Revenues of the Cemetery and Mortuary Contracts

Years Ended December 31

Major goods/service lines

Net mortuary and cemetery

Timing of Revenue Recognition

1 unchanged sentence

Services transferred at a point in time

Net mortuary and cemetery

Judgments and Estimates

121 unchanged sentences

Discount on cash flows

( 2,889,958 )

Present value of lease liabilities

5 unchanged sentences

Right-of-use assets

Lease liabilities

Other liabilities and accrued expenses

Lease liabilities

Other liabilities and accrued expenses

Finance Leases

3 unchanged sentences

Property and equipment, net

Right-of-use assets, net

Property and equipment, net

Lease liabilities

Bank and other loans payable

Lease liabilities

Bank and other loans payable

Company is also a lessor and has operating lease agreements with various tenants that lease its commercial and residential properties.

2 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data