What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 836 added, 662 removed, 1679 unchanged (47% of the section changed)

Fixed maturity

securities, available for sale, at estimated fair value (amortized cost of $ 369,382,018 and $ 362,750,511 for 2023 and 2022;

for credit losses of $ 179,500 and nil for 2023 and 2022)

Financial Statements.

June 30, 2023 (Unaudited)

December 31, 2022

Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $ 371,731,265 and $ 362,750,511 for 2023 and 2022, respectively;

allowance for credit losses of $ 224,005 and nil for 2023 and 2022, respectively)

$ 354,789,812

$ 345,858,492

Equity securities at estimated

fair value (cost of $ 10,356,783 and $ 9,942,265 for 2023 and 2022)

Mortgage loans held for

investment (net of allowance for credit losses of $ 2,735,419 and $ 1,970,311 for 2023 and 2022)

Real estate held for investment

(net of accumulated depreciation of $ 25,361,779 and $ 23,793,204 for 2023 and 2022)

Equity securities at estimated fair value (cost of $ 10,416,580 and $ 9,942,265 for 2023 and 2022, respectively)

Mortgage loans held for investment (net of allowance for credit losses of $ 2,663,560 and $ 1,970,311 for 2023 and 2022, respectively)

Real estate held for investment (net of accumulated depreciation of $ 26,941,328 and $ 23,793,204 for 2023 and 2022, respectively)

Real estate held for sale

Other investments and policy

loans (net of allowance for credit losses of $ 1,685,901 and $ 1,609,951 for 2023 and 2022)

Other investments and policy loans (net of allowance for credit losses of $ 1,690,693 and $ 1,609,951 for 2023 and 2022, respectively)

Accrued investment income

2 unchanged sentences

Loans held for sale at estimated fair value

Receivables (net of allowance for credit losses

of $ 1,867,124 and $ 2,229,791 for 2023 and 2022)

Restricted assets (including $ 6,877,734 and

$ 6,565,552 for 2023 and 2022 at estimated fair value;

allowance for credit losses of $ 5,874 and nil for 2023 and 2022)

Cemetery perpetual care trust investments (including

$ 3,948,380 and $ 3,859,893 for 2023 and 2022 at estimated fair value;

allowance for credit losses of $ 2,196 and nil for 2023

Receivables (net of allowance for credit losses of $ 1,492,934 and $ 2,229,791 for 2023 and 2022, respectively)

Restricted assets (including $ 7,780,162 and $ 6,565,552 for 2023 and 2022 respectively, at estimated fair value;

allowance for credit losses of $ 2,760 and nil for 2023 and 2022, respectively)

Cemetery perpetual care trust investments (including $ 4,315,932 and $ 3,859,893 for 2023 and 2022 respectively, at estimated fair value;

allowance for credit losses of $ 1,453 and ni l for 2023 and 2022, respectively)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition

Deferred policy and pre-need contract acquisition costs

Mortgage servicing rights, net

6 unchanged sentences

CONSOLIDATED BALANCE SHEETS (Continued)

Liabilities and Stockholders’

Future policy benefits and unpaid

June 30, 2023 (Unaudited)

December 31, 2022

Liabilities and Stockholders’ Equity

Future policy benefits and unpaid claims

$ 901,792,172

2 unchanged sentences

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract

Deferred pre-need cemetery and mortuary contract revenues

Cemetery perpetual care obligation

10 unchanged sentences

40,000,000 shares authorized;

issued 18,807,013 shares in 2023 and 18,758,031 shares in 2022

non-voting common stock - $ 1.00 par

19,893,700 shares issued and outstanding as of June 30, 2023 and 18,758,031 shares issued and outstanding as of December 31, 2022

non-voting common stock - $ 1.00 par value;

5,000,000 shares authorized;

none issued or outstanding

convertible common stock - $ 2.00 par

convertible common stock - $ 2.00 par value;

6,000,000 shares authorized;

issued 2,889,923 shares in 2023 and 2,889,859 shares in 2022

2,973,552 shares issued and outstanding as of June 30, 2023 and 2,889,859 shares issued and outstanding as of December 31, 2022

Common Stock , Value

Additional paid-in capital

Accumulated other comprehensive loss, net of

Accumulated other comprehensive loss, net of taxes

( 12,894,771 )

1 unchanged sentence

Retained earnings

Treasury stock at cost - 612,142 Class A shares

and 34,016 Class C shares in 2023;

and 525,870 Class A shares and 34,016 Class C shares in 2022

Treasury stock at cost - 849,005 Class A shares and 35,717 Class C shares as of June 30, 2023;

and 525,870 Class A shares and 34,016 Class C shares as of December 31, 2022

( 5,841,350 )

( 4,366,651 )

Total stockholders’

Liabilities and Stockholders’ Equity

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

$ 1,403,606,748

3 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Months Ended March 31

Three Months Ended June 30,

Six Months Ended June 30,

Mortgage fee income

2 unchanged sentences

Net mortuary and cemetery sales

Gains on investments and other assets

Gains (losses) on investments and other assets

Total revenues

3 unchanged sentences

Increase in future policy benefits

Amortization of deferred policy and pre-need

acquisition costs and value of business acquired

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

Costs related to funding

mortgage loans

Depreciation on property and equipment

Costs related to funding mortgage loans

Interest expense

Cost of goods and services sold-mortuaries

and cemeteries

Cost of goods and services sold-mortuaries and cemeteries

Total benefits and expenses

2 unchanged sentences

( 1,796,627 )

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)

( 1,155,397 )

( 2,141,343 )

( 2,370,195 )

Net earnings per Class A Equivalent common share ( 1 )

Net earnings per Class A Equivalent common share-assuming

dilution ( 1 )

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

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

(1) Net earnings per

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Months Ended March 31

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income:

Unrealized gains (losses)

on fixed maturity securities available for sale

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

$ ( 4,993,177 )

Unrealized gains (losses)

on restricted assets (1)

gains (losses) on cemetery perpetual care trust investments (1)

comprehensive income (loss), before income tax

( 12,995,132 )

tax (expense) benefit

( 28,322,034 )

Other comprehensive

income (loss), net of income tax

Unrealized losses on restricted assets ( 1 )

Unrealized losses on cemetery perpetual care trust investments

Other comprehensive income (loss), before income tax

( 5,003,104 )

Comprehensive income

( 13,054,169 )

Fixed maturity securities available for sale

( 28,490,377 )

Income tax (expense) benefit

Other comprehensive income (loss), net of income tax

( 3,952,052 )

( 10,310,485 )

( 22,500,815 )

Comprehensive income (loss)

$ ( 6,736,036 )

$ ( 15,697,648 )

(1) Fixed maturity

securities available for sale

accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Months Ended March 31, 2023

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Six Months Ended June 30, 2023

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2023

3 unchanged sentences

$ 292,786,927

Cumulative effect adjustment upon adoption

of new accounting standard (ASU 2016-13)

Cumulative effect adjustment upon

adoption of new accounting

standard (ASU 2016-13)

Other comprehensive gain

5 unchanged sentences

( 1,204,357 )

Conversion Class C to

Conversion Class C to Class A

March 31, 2023

3 unchanged sentences

$ 297,033,642

Months Ended March 31, 2022

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

Other comprehensive loss

( 3,952,052 )

Stock-based compensation expense

Exercise of stock options

Vesting of restricted stock units

Sale of treasury stock

Purchase of treasury stock

( 1,514,049 )

( 1,387,059 )

Conversion Class C to Class A

Stock dividends

( 9,002,969 )

June 30, 2023

$ ( 12,894,771 )

$ 200,078,709

$ ( 5,841,350 )

$ 298,762,757

Six Months Ended June 30, 2022

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2022

5 unchanged sentences

( 12,190,330 )

Stock-based compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

Conversion Class C to Class A

March 31, 2022

$ 187,766,207

$ ( 843,916 )

$ 292,300,867

Other comprehensive loss

( 10,310,485 )

Other comprehensive gain (loss)

5 unchanged sentences

Purchase of treasury stock

Conversion Class C to

March 31, 2022

( 6,505,050 )

Conversion Class C to Class A

Stock dividends

( 8,067,485 )

June 30, 2022

$ ( 4,430,367 )

$ 183,273,171

$ ( 6,229,574 )

$ 280,485,055

accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Months Ended March 31

Cash flows from operating

cash (used in) provided by operating activities

$ ( 16,073,799 )

Cash flows from investing

Six Months Ended June 30,

Cash flows from operating activities:

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed maturity securities

1 unchanged sentence

( 49,382,284 )

Sales, calls and maturities of fixed maturity

Sales, calls and maturities of fixed maturity securities

Purchases of equity securities

4 unchanged sentences

Purchases of restricted assets

( 1,148,199 )

Sales, calls and maturities of restricted assets

Net changes in cemetery perpetual care trust

Purchases of cemetery perpetual care trust

Sales, calls and maturities of perpetual care

trust investments

Mortgage loans held for investment, other investments

and policy loans made

Net changes in cemetery perpetual care trust investments

Purchases of cemetery perpetual care trust investments

Sales, calls and maturities of perpetual care trust investments

Mortgage loans held for investment, other investments and policy loans made

( 326,286,179 )

( 382,449,025 )

Payments received for mortgage loans held for

investment, other investments and policy loans

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

Purchases of property and equipment

4 unchanged sentences

Sales of real estate

cash provided by (used in) investing activities

Net cash provided by (used in) investing activities

( 36,144,573 )

Cash flows from financing

Cash flows from financing activities:

Investment contract receipts

5 unchanged sentences

( 2,591,416 )

( 7,277,291 )

Repayment of bank loans

( 68,658,021 )

( 45,217,295 )

Proceeds from bank loans

Net change in warehouse

line borrowings for loans held for sale

Net change in warehouse line borrowings for loans held for sale

( 55,805,126 )

( 65,362,776 )

cash used in financing activities

Net cash used in financing activities

( 62,576,277 )

( 60,502,488 )

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

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

( 11,843,357 )

Cash, cash equivalents,

restricted cash and restricted cash equivalents at beginning of period

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

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

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

$ 121,640,460

$ 142,406,108

Supplemental Disclosure

of Cash Flow Information:

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

Income taxes (net of refunds)

Non Cash Operating, Investing

and Financing Activities:

Transfer from mortgage loans held for investment

to restricted assets

Transfer from mortgage loans held for investment

to cemetery perpetual care trust investments

Non Cash Operating, Investing and Financing Activities:

Transfer from mortgage loans held for investment to restricted assets

Transfer from mortgage loans held for investment to cemetery perpetual care trust investments

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

Benefit plans funded with treasury stock

Right-of-use assets obtained in exchange for

operating lease liabilities

Accrued real estate construction costs and

accompanying notes to condensed consolidated financial statements (unaudited).

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

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

Accrued real estate construction costs and retainage

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

flows is presented in the table below:

Months Ended March 31

Six Months Ended June 30,

Cash and cash equivalents

$ 110,285,941

$ 131,296,538

Restricted assets

Cemetery perpetual care trust investments

Total cash, cash equivalents,

restricted cash and restricted cash equivalents

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

$ 121,640,460

1 unchanged sentence

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

$ 121,640,460

$ 142,406,108

accompanying notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

30, 2023 (Unaudited)

Basis of Presentation

of Presentation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally

8 unchanged sentences

considered necessary for a fair presentation have been included.

Operating results for the three month period ended March 31, 2023 are

not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and six month periods ended June 30,

2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

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

21 unchanged sentences

Environment .

Item 7.01 Regulation FD Disclosure.

March 10, 2023 and March 12, 2023, Silicon Valley Bank and Signature Bank were placed in receivership with the Federal Deposit Insurance

8 unchanged sentences

and community banks.

information furnished in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,

except as shall be expressly set forth by specific reference in such filing.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

Recent Accounting Pronouncements

Accounting Pronouncements

Standards Adopted in 2023

3 unchanged sentences

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

probable initial recognition threshold 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 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, decreased the opening balance of retained

earnings in stockholders’ equity by $ 671,506 on January 1, 2023.

The allowances for credit losses increased (decreased) by the

following amounts.

probable initial recognition threshold 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 Topic 326 requires that credit losses be presented as

an allowance rather than as a write-down.

The Company adopted this standard on January 1, 2023, and after a review of the affected assets,

decreased the opening balance of retained earnings in stockholders’ equity by $ 671,506 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

1 unchanged sentence

$ ( 192,607 )

Restriced assets - mortgage

loans held for investment:

Cemetery perpetual care trust

investments - mortgage loans held for investment:

Residential construction

Restriced assets - mortgage loans held for investment:

Residential construction

Cemetery perpetual care trust investments - mortgage loans held for investment:

Residential construction

Standards Issued But Not Yet Adopted

4 unchanged sentences

the rate used to discount future cash flows.

The ASU will improve the accounting for certain market-based options or guarantees associated

with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding required

The standard is aimed at improving the accounting for certain market-based options or guarantees

associated with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding

required disclosures.

In November 2020, the FASB issued an update to ASU No.

2018-12 that made the ASU effective for the Company on January 1,

The Company has made progress in the implementation of the new standard, including the involvement of actuaries, accountants, and

systems specialists.

However, the Company has not yet estimated the impact the new guidance will have on the consolidated financial statements.

2018-12 that requires the standard to be adopted by the

Company commencing on January 1, 2025.

The Company has made progress in the implementation of the new standard, including the involvement

of actuaries, accountants, and systems specialists.

However, the Company has not yet estimated the impact the new guidance will have

on the consolidated financial statements.

Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the Company’s

3 unchanged sentences

30, 2023 (Unaudited)

Company’s investments as of March 31, 2023 are summarized as follows:

3) Investments

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

of Investments

Unrealized Gains

Unrealized Losses (1)

for Credit Losses

Fixed maturity securities,

available for sale, at estimated fair value:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses (1)

Allowance for Credit Losses

Estimated Fair Value

June 30, 2023:

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

Treasury securities and obligations of U.S.

1 unchanged sentence

$ ( 2,554,426 )

of states and political subdivisions

securities including public utilities

Obligations of states and political subdivisions

Corporate securities including public utilities

( 11,487,153 )

Mortgage-backed

Mortgage-backed securities

( 4,704,791 )

preferred stock

fixed maturity securities available for sale

Redeemable preferred stock

Total fixed maturity securities available for sale

$ 371,731,265

2 unchanged sentences

$ 354,789,812

Equity securities at estimated

Equity securities at estimated fair value:

Common stock:

miscellaneous and all other

Industrial, miscellaneous and all other

$ ( 591,604 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 591,604 )

Mortgage loans held for investment

at amortized cost:

Mortgage loans held for investment at amortized cost:

Residential construction

Unamortized deferred loan fees, net

3 unchanged sentences

Net discounts

mortgage loans held for investment

Total mortgage loans held for investment

$ 271,049,585

Real estate held for investment

- net of accumulated depreciation:

real estate held for investment

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

$ 180,962,902

Real estate held for sale:

real estate held for sale

Other investments and policy

loans at amortized cost:

Home Loan Bank stock (2)

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank stock (2)

Other investments

Allowance for credit losses for insurance assignments

( 1,690,693 )

other investments and policy loans

investment income

Total other investments and policy loans

Accrued investment income

Total investments

$ 896,174,397

unrealized losses are net of allowance for credit losses

$ 978,100 of Membership stock and $ 2,918,700 of Activity stock due to short-term borrowings and letters of credit.

(1) Gross unrealized

losses are net of allowance for credit losses

(2) Includes $ 84,800

of Membership stock and $ 2,592,300 of Activity stock attributable to short-term borrowings and letters of credit.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Company’s investments as of December 31, 2022 are summarized as follows:

Unrealized Gains

Unrealized Losses

Fixed maturity securities,

available for sale, at estimated fair value:

securities and obligations of U.S.

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

$ ( 2,685,277 )

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Obligations of states and political subdivisions

Corporate securities including public utilities

( 11,930,773 )

2 unchanged sentences

Redeemable preferred stock

fixed maturity securities available for sale

Total fixed maturity securities available for sale

$ 362,750,511

1 unchanged sentence

$ 345,858,492

Equity securities at estimated

Equity securities at estimated fair value:

Common stock:

miscellaneous and all other

Industrial, miscellaneous and all other

$ ( 948,114 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 948,114 )

Mortgage loans held for investment

at amortized cost:

Mortgage loans held for investment at amortized cost:

Residential construction

Unamortized deferred

loan fees, net

Unamortized deferred loan fees, net

( 1,746,605 )

Allowance for credit

Allowance for credit losses

( 1,970,311 )

Net discounts

mortgage loans held for investment

Total mortgage loans held for investment

$ 308,123,927

Real estate held for investment

- net of accumulated depreciation:

real estate held for investment

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

$ 191,328,616

Real estate held for sale:

real estate held for sale

Other investments and policy

loans at amortized cost:

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

3 unchanged sentences

( 1,609,951 )

other investments and policy loans

investment income

Total other investments and policy loans

Accrued investment income

Total investments

$ 948,963,125

Includes $ 938,500 of Membership

stock and $ 1,661,800 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 attributable to short-term borrowings and letters of credit.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Maturity Securities

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

at March 31, 2023 and at December 31, 2022.

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

June 30, 2023 and at December 31, 2022.

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

The fair values of fixed maturity securities are based on quoted market prices, when available.

fair values of fixed maturity securities are based on quoted market prices, when available.

For fixed maturity securities not actively

3 unchanged sentences

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

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

At March 31, 2023

Securities And Obligations of U.S.

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

Combined Fair Value

At June 30, 2023

Treasury Securities And Obligations of U.S.

Government Agencies

Obligations of States and

Political Subdivisions

Obligations of States and Political Subdivisions

Corporate Securities

and other asset-backed securities

Mortgage and other asset-backed securities

$ 162,247,498

$ 123,907,957

$ 286,155,455

At December 31, 2022

Treasury Securities And

Obligations of U.S.

Treasury Securities And Obligations of U.S.

Government Agencies

Obligations of States and

Political Subdivisions

Obligations of States and Political Subdivisions

Corporate Securities

and other asset-backed securities

Mortgage and other asset-backed securities

$ 267,774,539

$ 280,964,126

were 656 securities with fair value of 94.4 % of aggregate amortized cost at March 31, 2023.

There were 713 securities with fair value

of 93.6 % of aggregate amortized cost at December 31, 2022.

Credit losses of $ 179,500 and nil have been recognized for the three month

periods ended March 31, 2023 and 2022 and are included in gains (losses) on investments and other assets on the condensed consolidated

statements of earnings.

Other unrealized losses for which no credit loss was recognized are primarily the result of the recent rise in

interest rates and inflation.

holdings were comprised of 748 securities with fair value of 93.7 % of amortized cost at June 30, 2023.

Relevant holdings were comprised

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

Credit losses of $ 44,505 and nil have been recognized

for the three month periods ended June 30, 2023 and 2022, respectively.

Credit losses of $ 224,005 and nil have been recognized for the

six month periods ended June 30, 2023 and 2022, respectively.

Credit losses are included in gains (losses) on investments and other assets

on the condensed consolidated statements of earnings.

Other unrealized losses for which no credit loss was recognized are primarily the

result of the recent increases in interest and inflation rates.

of Allowance for Credit Losses

20 unchanged sentences

does not consider these securities to have credit loss because the Company does not intend to sell these securities and it is not more

likely than not the Company will be required to sell these securities before a recovery of amortized cost, which may be maturity.

likely than not the Company will be required to sell these securities before a recovery of amortized cost, which may be at maturity.

the Company intends to sell a fixed maturity security or if it is more likely than not that the Company will be required to sell a security

2 unchanged sentences

on the condensed consolidated statements of earnings.

the Company does not intend to sell and it is not more likely than not the Company will be required to sell the debt security but also

do not expect to recover the entire amortized cost basis of the security, a credit loss would be recognized in earnings for the amount

the Company does not intend to sell and it is not more likely than not that the Company will be required to sell the debt security but

also do not expect to recover the entire amortized cost basis of the security, a credit loss is recognized in earnings for the amount

of the expected credit loss with a corresponding allowance for credit losses as a contra-asset account.

4 unchanged sentences

on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit

A write-off may also occur if the Company intends to sell a security or when it is more likely than not the Company will be required

to sell the security before the recovery of its amortized cost.

A write-off may also occur if the Company intends to sell a security or when it is more likely than not that the Company will be

required to sell the security before the recovery of its amortized cost.

Company does not measure a credit loss allowance on accrued interest receivable, included in accrued investment income on the condensed

3 unchanged sentences

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

Months Ended March 31, 2023

Six Months Ended June 30, 2023

Treasury Securities And Obligations of U.S.

Government Agencies

of states and political subdivisions

Mortgage-backed

Obligations of states and political subdivisions

Corporate securities

Mortgage-backed securities

Beginning balance

for credit losses not previously recorded

in allowance on securities with previous allowance

for securities sold during the period

for securities with credit losses due to intent to sell

charged against the allowance

of amounts previously written off

Additions for credit losses not previously recorded

Change in allowance on securities with previous allowance

Reductions for securities sold during the period

Reductions for securities with credit losses due to intent to sell

Write-offs charged against the allowance

Recoveries of amounts previously written off

Ending Balance

5 unchanged sentences

recognized in earnings on fixed maturity securities available for sale which was required to be presented prior to the adoption of ASU

Schedule of Earnings on Fixed Maturity

Balance of credit-related

OTTI at January 1

for credit impairments recognized on:

not previously impaired

previously impaired

Reductions 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 March 31

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

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 June 30

table below presents the amortized cost and the estimated fair value of fixed maturity securities available for sale at June 30, 2023,

by contractual maturity.

Actual or expected maturities may differ from contractual maturities because certain borrowers may have

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

Schedule of Investments Classified by Contractual

Maturity Date

Actual or expected maturities may differ from contractual maturities because certain borrowers may have the

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

of Investments Classified by Contractual Maturity Date

Amortized Cost

Estimated Fair Value

Due in 1 year

3 unchanged sentences

Mortgage-backed securities

preferred stock

Redeemable preferred stock

$ 371,731,265

2 unchanged sentences

The Company had pledged a total of $ 84,531,263 ,

at estimated fair value, of fixed maturity securities with the FHLB at March 31, 2023.

at estimated fair value, of fixed maturity securities with the FHLB at June 30, 2023.

These pledged securities are used as collateral

for any FHLB cash advances.

As of March 31, 2023, the Company owed $ 31,000,000 to the FHLB and its estimated maximum borrowing capacity

was $ 55,351,809 .

As of June 30, 2023, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was $ 76,274,326 .

Quality Indicators

4 unchanged sentences

grade” while the NAIC Class 3 through 6 designations are considered “non-investment grade.” Based on the NAIC designations,

the Company had 98.1 % and 97.7 % of its fixed maturity securities rated investment grade as of March 31, 2023 and December 31, 2022, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

Investments (Continued)

following table summarizes the credit quality, as determined by NAIC designation, of the Company’s fixed maturity securities available

for sale, excluding redeemable preferred stock.

the Company had 98.0 % and 97.7 % of its fixed maturity securities rated investment grade as of June 30, 2023 and December 31, 2022, respectively.

following table summarizes the credit quality, by NAIC designation, of the Company’s fixed maturity securities available for sale,

excluding redeemable preferred stock.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

June 30, 2023

December 31, 2022

NAIC Designation

Amortized Cost

Estimated Fair Value

Amortized Cost

Estimated Fair Value

$ 203,707,382

7 unchanged sentences

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

Schedule of Major Categories of Net Investment Income

Months Ended March 31

Proceeds from

of Major Categories of Net Investment Income

Three Months Ended June 30,

Six Months Ended June 30,

Proceeds from sales

Gross realized gains

Gross realized losses

and cash on deposit with regulatory authorities as required by law amounted to $ 10,952,850 at March 31, 2023 and $ 11,032,165 at December

and cash on deposit with regulatory authorities as required by law amounted to $ 10,953,870 at June 30, 2023 and $ 11,032,165 at December

These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance

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

equity securities and fixed maturity securities) at March 31, 2023, other than investments issued or guaranteed by the United States

equity securities and fixed maturity securities) at June 30, 2023, other than investments issued or guaranteed by the United States Government.

Estate Held for Investment and Held for Sale

Company strategically deploys resources into real estate to match the income and yield durations of its primary obligations.

for these real estate assets come through its various business units in the form of acquisition, development, and mortgage foreclosures.

Company strategically deploys resources into real estate assets to match the income and yield durations of its primary obligations.

sources for these real estate assets come through its various business units in the form of acquisition, development, and mortgage foreclosures.

Real Estate Held for Investment and Held for Sale

14 unchanged sentences

These properties include office buildings, flex office

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

uses bank debt in strategic cases, primarily where it is anticipated to improve yields, or facilitate the acquisition of higher quality

assets or asset class diversification.

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

The Company uses

bank debt in strategic cases, primarily where it is anticipated to improve yields, or facilitate the acquisition of higher quality assets

or asset class diversification.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

aggregated net book value of commercial real estate serving as collateral for bank loans was $ 128,272,775 and $ 129,330,119 as of March

aggregated net book value of commercial real estate serving as collateral for bank loans was $ 126,954,484 and $ 129,330,119 as of June

30, 2023, and December 31, 2022, respectively.

The associated bank loan carrying values totaled $ 96,652,659 and $ 97,112,131 as of March

The associated bank loan carrying values totaled $ 96,199,103 and $ 97,112,131 as of June

30, 2023, and December 31, 2022, respectively.

the three month periods ended March 31, 2023, and 2022, the Company did not record any impairment losses on commercial real estate held

for investment or held for sale.

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

consolidated statements of earnings.

the three month periods ended March 31, 2023, and 2022, the Company recorded depreciation expense on commercial real estate held for

investment of $ 1,565,927 and $ 1,323,930 , respectively.

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 of earnings.

the three and six month periods ended June 30, 2023, and 2022, the Company did not record any impairment losses on commercial real estate

held for investment or held for sale.

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

condensed consolidated statements of earnings.

the three month periods ended June 30, 2023, and 2022, the Company recorded depreciation expense on commercial real estate held for investment

of $ 1,576,901 and $ 1,665,343 , respectively, and of $ 3,142,828 and $ 2,989,274 during the six month periods ended June 30, 2023, and 2022,

respectively.

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 of earnings.

Company’s commercial real estate held for investment is summarized as follows as of the respective dates indicated:

Schedule of Commercial Real Estate Investment

Square Footage

of Commercial Real Estate Investment

Net Book Value

Total Square Footage

June 30, 2023

December 31, 2022

June 30, 2023

December 31, 2022

$ 144,998,640

2 unchanged sentences

$ 152,890,656

Center53 phase 1 and phase 2

Includes Center53

Company’s commercial real estate held for sale is summarized as follows as of the respective dates indicated:

Net Book Value

June 30, 2023

December 31, 2022

Mississippi (1)

of approximately 93 acres of undeveloped land

Consists of approximately 93 acres of undeveloped land

property is being marketed with the assistance of commercial real estate brokers in Mississippi.

4 unchanged sentences

The Company also invests in

residential subdivision land developments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

Investments (Continued)

residential subdivision development.

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

2 unchanged sentences

residential property portfolio.

the three month periods ended March 31, 2023, and 2022 the Company did not record any impairment losses on residential real estate held

for sale or held for investment.

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

consolidated statements of earnings.

the three month periods ended March 31, 2023, and 2022, the Company recorded depreciation expense on residential real estate held for

investment of $ 2,648 and $ 2,648 , 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 of earnings.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

the three and six month periods ended June 30, 2023, and 2022 the Company did not record any impairment losses on residential real estate

held for sale or held for investment.

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

condensed consolidated statements of earnings.

the three month periods ended June 30, 2023, and 2022, the Company recorded depreciation expense on residential real estate held for

investment of $ 2,648 and $ 2,648 , respectively, and of $ 5,296 and $ 5,296 during the six month periods ended June 30, 2023, and 2022, 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 of earnings.

Company’s residential real estate held for investment is summarized as follows as of the respective dates indicated:

Schedule of Residential Real Estate Investment

subdivision land developments

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

of Residential Real Estate Investment

Net Book Value

June 30, 2023

December 31, 2022

Includes residential subdivision development

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

June 30, 2023

December 31, 2022

Lots developed

1 unchanged sentence

Company’s residential real estate held for sale is summarized as follows as of the respective dates indicated:

net book value of foreclosed residential real estate included in residential real estate held for sale was $ 5,570,788 and $ 11,010,029

as of March 31, 2023, and December 31, 2022, respectively.

Net Book Value

June 30, 2023

December 31, 2022

Unimproved land

net book value of foreclosed residential real estate included in residential real estate held for sale was nil and $ 11,010,029 as of

June 30, 2023, and December 31, 2022, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

4 unchanged sentences

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

As of March 31, 2023, real estate owned

As of June 30, 2023, real estate owned

and occupied by the Company is summarized as follows:

1 unchanged sentence

Business Segment

Square Footage

Footage Occupied by the Company

433 Ascension

Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2 (1)

Corporate Offices,

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

1044 River Oaks Dr., Flowood,

Approximate Square Footage

Square Footage Occupied by the Company

433 Ascension Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2 (1)

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

1044 River Oaks Dr., Flowood, MS (1)

Life Insurance Operations

1818 Marshall Street, Shreveport,

1818 Marshall Street, Shreveport, LA (2)

Life Insurance Operations

909 Foisy Street, Alexandria,

909 Foisy Street, Alexandria, LA (2)

Life Insurance Sales

812 Sheppard Street, Minden,

812 Sheppard Street, Minden, LA (2)

Life Insurance Sales

1 unchanged sentence

Life Insurance Sales

in real estate held for investment on the condensed consolidated balance sheets

in property and equipment on the condensed consolidated balance sheets

Included in real estate held for investment on the condensed

consolidated balance sheets

Included in property and equipment on the condensed consolidated

balance sheets

Loans Held for Investment

7 unchanged sentences

portfolio consisting of residential mortgages, commercial loans and residential construction loans and requires collateral on all real

estate exposures, a substantial portion of its debtors’ ability to honor obligations is reliant on the economic stability of the

geographic region in which the debtors do business or are employed.

As of March 31, 2023, the Company had 60 %, 10 %, 6 %, 5 %, 5 %, 3 % and

3 % of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, Arizona, Hawaii, and Nevada, respectively.

As of December 31, 2022, the Company had 64 %, 10 %, 5 %, 5 %, 3 % and 3 % of its mortgage loans from borrowers located in the states of Utah,

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

estate exposures, a substantial portion of the relevant debtors’ ability to honor obligations is dependent upon the economic stability

of the geographic region in which the debtors do business or are employed.

As of June 30, 2023, the Company had 54 %, 10 %, 8 %, 6 % and

5 %, of its mortgage loans from borrowers located in the states of Utah, Florida, California, Arizona, and Texas, respectively.

December 31, 2022, the Company had 64 %, 10 %, 5 % and 5 % of its mortgage loans from borrowers located in the states of Utah, Florida, California,

and Texas, respectively.

loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs, premiums, discounts,

3 unchanged sentences

The Company defers related material loan origination fees, net of related direct loan origination

costs, and amortizes the net fees over the term of the loans.

costs, and amortizes the net fees over the terms of the loans.

Origination fees are included in net investment income on the condensed

17 unchanged sentences

This credit loss expense is included in other expenses on the condensed consolidated statements of

a mortgage loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and write off

any interest income that had been accrued.

Given this policy of timely writing off uncollectible accrued interest, the Company does not

measure a credit loss allowance on accrued interest receivable as it writes off any uncollectible accrued interest receivable balances

to net investment income in a timely manner.

Accrued interest receivable is included in accrued investment income on the condensed consolidated

balance sheets.

Payments received for mortgage loans on a non-accrual status are recognized on a cash basis.

Interest income recognized

from any payments received for mortgage loans on a non-accrual status was immaterial.

Accrual of interest resumes if a mortgage loan

is brought current.

Interest not accrued on these loans totaled approximately $ 110,000 and $ 226,000 as of March 31, 2023, and December

31, 2022, respectively.

a mortgage loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and reverse any

interest income that had been accrued.

Given this policy, the Company does not measure a credit loss allowance on accrued interest receivable.

Accrued interest receivable is included in accrued investment income on the condensed consolidated balance sheets.

Payments received

for mortgage loans on a non-accrual status are recognized when received.

The interest income recognized from payments received for mortgage

loans on a non-accrual status was immaterial.

Accrual of interest resumes if a mortgage loan is brought current.

Interest not accrued

on these loans totaled approximately $ 145,000 and $ 226,000 as of June 30, 2023, and December 31, 2022, respectively.

Company measures expected credit losses based on the fair value of the collateral when the Company determines that foreclosure is probable.

11 unchanged sentences

loans are evaluated for credit loss by analyzing loan attributes that are predictors for future credit losses.

The Company uses a combination of the debt service coverage ratio (“DSCR”)

and loan to value (“LTV”) to group similar commercial loans.

The Company applies a future loss factor to the outstanding balance of each group to arrive

at the allowance for credit loss.

The Company uses a combination

of the debt service coverage ratio (“DSCR”) and loan to value (“LTV”) to group similar loans.

The Company applies

a future loss factor to the outstanding balance of each group to arrive at the allowance for credit loss.

— These loans are secured by first and second mortgages on single family dwellings.

8 unchanged sentences

loan features such as loan type, loan to value, payment status, age, and current property values.

Company also considers historical delinquency rates and current unemployment trends.

The Company also considers historical

delinquency rates and current unemployment trends.

construction (including land acquisition and development) – These loans are underwritten in accordance with the Company’s

underwriting policies, which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent

appraisal valuations, and factor in estimates of the value of construction projects upon completion.

Construction loans generally involve

the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed

project and the ability of the borrower to secure long-term financing.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

construction (including land acquisition and development) – These loans are underwritten in accordance with the Company’s

underwriting policies, which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent

appraisal valuations, and factor in estimates of the value of construction projects upon completion.

Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment

substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing.

Additionally,

1 unchanged sentence

appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots.

These loans are considered to be of a higher risk than other mortgage loans due to their

ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest

rate sensitivity.

loans are considered to be of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic

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

determine the allowance for credit losses on residential construction mortgage loans, the Company considers historical activity and housing

market trends.

Given the continued volatility in the housing market, the Company has adjusted its

credit loss analysis.

Given the continued volatility in the housing market, the Company has adjusted its credit loss analysis.

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

Schedule of Allowance for Loan Losses

of Allowance for Loan Losses

Residential Construction

March 31, 2023

June 30, 2023

Allowance for credit losses:

Beginning balance - January 1, 2023

Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-13)

Cumulative effect adjustment upon adoption of

new accounting standard (ASU 2016-13)

Change in provision for credit losses

Ending balance - March 31, 2023

Ending balance - June 30, 2023

December 31, 2022

3 unchanged sentences

Ending balance - December 31, 2022

Note 2 of the notes to the condensed consolidated financial statements

in other expenses on the condensed consolidated statements of earnings

See Note 2 of the notes to the condensed consolidated financial

Included in other expenses on the condensed consolidated statements

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

following table presents the aging of mortgage loans held for investment by loan type as of the dates indicated:

Schedule of Aging of Mortgage Loans

March 31, 2023

of Aging of Mortgage Loans

June 30, 2023

30-59 days past due

31 unchanged sentences

$ 308,123,927

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

Interest income is not recognized on loans which are more than

90 days past due or in foreclosure.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

7 unchanged sentences

is an indication of impairment.

unpaid principal balance of commercial mortgage loans by credit quality indicator and vintage year was as follows as of March 31, 2023:

aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of

June 30, 2023:

of Commercial Mortgage Loans By Credit Quality Indicator

Credit Quality Indicator

Less than 65%

2 unchanged sentences

8,785,154 (1) (1)

construction loan

Commercial construction loan

Company evaluates and monitors the credit quality of its residential mortgage loans by analyzing loan performance.

The Company defines

non-performing mortgage loans as loans 90 days or greater delinquent and on a non-accrual status.

non-performing mortgage loans as loans more than 90 days past due and on a non-accrual status.

Monitoring a residential mortgage loan

increases when the loan is delinquent or earlier if there is an indication of impairment.

unpaid principal balance of residential mortgage loans by credit quality indicator and vintage year was as follows as of March 31, 2023:

aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of

June 30, 2023:

Credit Quality Indicator

1 unchanged sentence

Non-performing (1)

Includes residential mortgage loans

in the process of foreclosure of $ 713,552 at March 31, 2023

Includes residential mortgage loans in the process of foreclosure

of $ 289,922 at June 30, 2023

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

if there is an indication of impairment.

unpaid principal balance of residential construction mortgage loans by credit quality indicator and vintage year was as follows as of

March 31, 2023:

aggregate unpaid principal balance of residential construction mortgage loans by credit quality indicator and origination year was as

follows as of June 30, 2023:

of Residential Construction Mortgage Loans

10 unchanged sentences

of Aging of Insurance Assignments

December 31 2022

As of June 30,

As of December 31, 2022

30-59 days past due

8 unchanged sentences

Company records an allowance for credit losses when the insurance assignment is funded.

Once an insurance assignment

moves to 90 days or legal proceedings, it is monitored for write-off and collectability, and any adjustments to the allowance are done

at that time.

See Note 2 regarding the adoption of ASU 2016-13.

Once an insurance assignment moves to 90 days

or legal proceedings, it is monitored for write-off and collectability, and any adjustments to the allowance are done at that time.

Note 2 regarding the adoption of ASU 2016-13.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

Change in provision for credit losses

Ending balance - March 31, 2023

Ending balance - June 30, 2023

Beginning balance - January 1, 2022

1 unchanged sentence

Ending balance - December 31, 2022

Included in other expenses on the

condensed consolidated statements of earnings

Included in other expenses on the condensed consolidated statements

Related Earnings

1 unchanged sentence

from investments and other assets:

Schedule of Gain (Loss) on Investments

Three Months Ended March 31

of Gain (Loss) on Investments

Three Months Ended June 30,

Six Months Ended June 30,

Fixed maturity securities:

5 unchanged sentences

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

( 2,106,375 )

( 2,713,422 )

Real estate held for investment and sale:

4 unchanged sentences

Gross realized losses

$ ( 914,395 )

$ ( 742,420 )

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

1 unchanged sentence

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

and mortuaries of $ 53,931 in net gains and $ 275,741 in net losses for the three month periods ended March 31, 2023, and 2022, respectively.

and mortuaries of $ 197,580 in net gains and $ 720,135 in net losses for the three month periods ended June 30, 2023, and 2022, respectively,

and of $ 251,510 in net gains and $ 995,876 in net losses for the six month periods ended June 30, 2023, and 2022, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

categories of net investment income were as follows:

Three Months Ended March 31

Three Months Ended June 30,

Six Months Ended June 30,

Fixed maturity securities available for sale

9 unchanged sentences

( 4,724,632 )

( 8,256,256 )

( 9,139,005 )

Net investment income

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 633,527 and $ 476,708 for the three

month periods ended March 31, 2023 and 2022, respectively.

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 1,250,861 and $ 730,534 for the

three month periods ended June 30, 2023 and 2022, respectively, and of $ 1,852,352 and $ 1,207,243 for the six month periods ended June

30, 2023 and 2022, respectively.

investment income on real estate consists primarily of rental revenue.

4 unchanged sentences

of Accrued Investment Income

December 31 2022

As of June 30,

As of December 31, 2022

Fixed maturity securities available for sale

8 unchanged sentences

Loans Held for Sale

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

Changes in the fair value of the loans are included in mortgage fee

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

Changes in the fair value of the loans are included in mortgage fee income.

Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on mortgage

4 unchanged sentences

of Aggregate Fair Value Loans Held for Sale

December 31 2022

As of June 30,

As of December 31, 2022

As of June 30,

As of December 31, 2022

Aggregate fair value

2 unchanged sentences

Unpaid principal balance

Unrealized gain (loss)

Unrealized loss

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

1 unchanged sentence

categories of mortgage fee income for loans held for sale are summarized as follows:

Schedule of Mortgage Fee Income for Loans Held for Sale

Three Months Ended March 31

of Mortgage Fee Income for Loans Held for Sale

Three Months Ended June 30,

Six Months Ended June 30,

Interest income

1 unchanged sentence

Change in fair value of loan commitments

( 2,247,244 )

Change in fair value of loans held for sale

( 1,401,738 )

( 3,463,922 )

( 6,210,487 )

Provision for loan loss reserve

18 unchanged sentences

of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses

As of June 30,

As of December 31,

Balance, beginning of period

5 unchanged sentences

Company maintains reserves for estimated losses on current production volumes.

For the three month period ended March 31, 2023, $ 239,801

For the six month period ended June 30, 2023, $ 513,431

in reserves were added at a rate of 4.5 basis points per loan, the equivalent of $ 450 per $ 1,000,000 in loans originated.

This is an increase

over the three month period ended March 31, 2022, when reserves of $ 306,026 were added at a rate of 2.9 basis points per loan originated,

increase over the six month period ended June 30, 2022, when reserves of $ 598,922 were added at a rate of 2.9 basis points per loan originated,

the equivalent of $ 290 per $ 1,000,000 in loans originated.

1 unchanged sentence

to maintain adequate loss reserves on current production.

Thus, the Company believes that the final loan loss reserve as of March 31,

Thus, the Company believes that the final loan loss reserve as of June 30,

2023, represents its best estimate for adequate loss reserves on loans sold.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

Stock Compensation Plans

1 unchanged sentence

based compensation expense for stock options issued of $ 142,696 and $ 220,175 has been recognized for these plans for the three month

periods ended March 31, 2023, and 2022, respectively, and is included in personnel expenses on the condensed consolidated statements

As of March 31, 2023, the total unrecognized compensation expense related to the options issued was $ 390,702 , which is expected

periods ended June 30, 2023, and 2022, respectively, and $ 284,883 and $ 491,922 has been recognized for these plans for the six month

periods ended June 30, 2023 and 2022, respectively, and is included in personnel expenses on the condensed consolidated statements of

As of June 30, 2023, the total unrecognized compensation expense related to the options issued was $ 248,748 , which is expected

to be recognized over the vesting period.

6 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.

of the stock option plans during the three month period ended March 31, 2023, is summarized as follows:

of the stock option plans during the six month period ended June 30, 2023, is summarized as follows:

Schedule of Activity of Stock Option Plans

4 unchanged sentences

Outstanding at January 1, 2023

Outstanding at March 31, 2023

As of March 31, 2023:

Adjustment for the effect of stock dividends

Outstanding at June 30, 2023

As of June 30, 2023:

Options exercisable

As of March 31, 2023:

As of June 30, 2023:

Available options for future grant

Weighted average contractual term of options outstanding at March 31, 2023

Weighted average contractual term of options exercisable at March 31, 2023

Aggregated intrinsic value of options outstanding at March 31, 2023 (1)

Aggregated intrinsic value of options exercisable at March 31, 2023 (1)

Company used a stock price of $ 6.23 as of March 31, 2023 to derive intrinsic value.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Weighted average contractual term of options outstanding at June 30, 2023

Weighted average contractual term of options exercisable at June 30, 2023

Aggregated intrinsic value of options outstanding at June 30, 2023 (1)

Aggregated intrinsic value of options exercisable at June 30, 2023 (1)

(1) The Company used

a stock price of $ 8.45 as of June 30, 2023 to derive intrinsic value.

(2) Adjusted for the

effect of annual stock dividends.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

1 unchanged sentence

Stock Compensation Plans (Continued)

of the stock option plans during the three month period ended March 31, 2022, is summarized as follows:

of the stock option plans during the six month period ended June 30, 2022, is summarized as follows:

Class A Shares

Average Exercise Price

Weighted Average Exercise Price (2)

Class C Shares

Average Exercise Price

Weighted Average Exercise Price (2)

Outstanding at January 1, 2022

Outstanding at March 31, 2022

As of March 31, 2022:

Adjustment for the effect of stock dividends

Outstanding at June 30, 2022

As of June 30, 2022:

Options exercisable

As of March 31, 2022:

Available options for

Weighted average contractual term of options outstanding

at March 31, 2022

Weighted average contractual term of options exercisable

at March 31, 2022

Aggregated intrinsic

value of options outstanding at March 31, 2022 (1)

Aggregated intrinsic

value of options exercisable at March 31, 2022 (1)

As of June 30, 2022:

Available options for future grant

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

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

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

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

(1) The Company used

a stock price of $ 10.00 as of March 31, 2022, which was the closing price of the Company’s Class A shares on Nasdaq for that day,

a stock price of $ 8.46 as of June 30, 2022, which was the closing price of the Company’s Class A shares on Nasdaq for that day,

to derive intrinsic value.

(2) Adjusted for the

effect of annual stock dividends.

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

the exercise date) of stock options exercised during the three month periods ended March 31,2023 and 2022 was $ 176,935 and $ 395,831 ,

respectively.

the exercise date) of stock options exercised during the six month periods ended June 30, 2023 and 2022 was $ 387,561 and $ 521,527 , respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Stock Units (“RSUs”)

based compensation expense for RSUs issued of $ 742 and nil has been recognized under these plans for the three month periods ended March

31, 2023 and 2022, respectively, and is included in personnel expenses on the condensed consolidated statements of earnings.

31, 2023, the total unrecognized compensation expense related to the RSUs issued was nil .

The fair value of each RSU granted is determined

based on the Company’s stock price on the date of grant.

based compensation expense for RSUs issued of nil has been recognized under these plans for the three month periods ended June 30, 2023

and 2022, respectively, and of $ 742 and nil has been recognized under these plans for the six month periods ended June 30, 2023 and 2022,

respectively, and is isncluded in personnel expenses on the condensed consolidated statements of earnings.

As of June 30, 2023, the total

unrecognized compensation expense related to the RSUs issued was nil .

The fair value of each RSU granted is determined based on the Company’s

stock price on the date of grant.

Prior to December 2022, the Company did not grant any RSUs.

of the RSUs during the three month period ended March 31, 2023 is summarized as follows:

of the RSUs during the six month period ended June 30, 2023 is summarized as follows:

Schedule of Activity Restricted Stock Units

Class A Shares

Average Grant Date Fair Value

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at March 31, 2023

Available RSUs for future

Aggregated intrinsic value of RSUs outstanding

at March 31, 2023 (1)

Non-vested at June 30, 2023

Available RSUs for future grant

Aggregated intrinsic value of RSUs outstanding at June 30, 2023 (1)

(1) The Company used

a stock price of $ 6.23 as of March 31, 2023 to derive intrinsic value.

a stock price of $ 8.45 as of June 30, 2023 to derive intrinsic value.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

Schedule of Earnings Per Share, Basic and Diluted

weighted-average shares outstanding

Three Months Ended

Six Months Ended

Basic weighted-average shares outstanding

Effect of dilutive securities:

Employee stock options

weighted-average shares outstanding

Diluted weighted-average shares outstanding

Basic net earnings per share

Diluted net earnings per share

the three month periods ended March 31, 2023, and 2022, there were 730,270 and nil anti-dilutive employee stock option shares, respectively,

the six month periods ended June 30, 2023, and 2022, there were 55,125 and 52,500 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.

4 unchanged sentences

Exercise of stock options

Conversion of Class C to

Outstanding shares at March 31, 2022

Vesting of restricted stock units

Stock dividends

Conversion of Class C to Class A

Outstanding shares at June 30, 2022

Outstanding shares at December 31, 2022

1 unchanged sentence

Exercise of stock options

Conversion of Class C to

Outstanding shares at March 31, 2023

Vesting of restricted stock units

Stock dividends

Conversion of Class C to Class A

Outstanding shares at June 30, 2023

Common stock, shares, outstanding, ending

25 unchanged sentences

to determine when other business segments may need to be reported.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

Business Segment Information (Continued)

Schedule of Revenues and Expenses by Reportable Segment

For the Three Months Ended

March 31, 2023

Life Insurance

For the Three Months Ended June 30, 2023

Revenues from external customers

3 unchanged sentences

( 3,837,012 )

For the Six Months Ended June 30, 2023

Revenues from external customers

$ 163,346,893

Intersegment revenues

( 4,455,627 )

Segment profit (loss) before income taxes

( 7,720,451 )

Identifiable Assets

5 unchanged sentences

$ 114,402,197

For the Three Months Ended

March 31, 2022

$ ( 89,723,622 )

$ 1,403,606,748

For the Three Months Ended June 30, 2022

Revenues from external customers

Intersegment revenues

( 2,238,964 )

Segment profit (loss) before income taxes

For the Six Months Ended June 30, 2022

Revenues from external customers

$ 100,570,271

$ 197,992,561

Intersegment revenues

8 unchanged sentences

$ 250,312,796

$ ( 91,917,796 )

$ 1,472,167,815

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

106 unchanged sentences

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

their classification in the condensed consolidated balance sheet at March 31, 2023.

their classification in the condensed consolidated balance sheet at June 30, 2023:

of Fair Value Assets and Liabilities Measured on a Recurring Basis

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available

Fixed maturity securities available for sale

$ 354,789,812

7 unchanged sentences

Derivatives - loan commitments (3)

accounted for at fair value on a recurring basis

Total assets accounted for at fair value on a

recurring basis

$ 546,947,071

1 unchanged sentence

$ 168,691,115

Liabilities accounted for at fair value

on a recurring basis

Derivatives - call options (4)

Derivatives - put options (4)

Liabilities accounted for at fair value on a recurring basis

Derivatives - loan commitments (4)

1 unchanged sentence

( 2,715,734 )

Total liabilities

accounted for at fair value on a recurring basis

Total liabilities accounted for at fair value

on a recurring basis

$ ( 2,715,734 )

Fixed maturity securities

available for sale

in other assets on the consolidated balance sheets

Included in other liabilities

and accrued expenses on the consolidated balance sheets

(1) Fixed maturity

securities available for sale

(2) Equity securities

(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 AND SUBSIDIARIES

4 unchanged sentences

their classification in the condensed consolidated balance sheet at December 31, 2022:

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

Assets accounted for at fair value on a

recurring basis

Fixed maturity securities available

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

$ 345,858,492

4 unchanged sentences

Restricted assets (2)

Cemetery perpetual care trust investments (1)

Cemetery perpetual care trust investments (2)

Derivatives - loan commitments (3)

Total assets accounted

for at fair value on a recurring basis

$ 513,235,939

$ 345,895,012

Total assets accounted for at fair value on a recurring basis

$ 513,235,939

Liabilities accounted for at fair value

on a recurring basis

Derivatives - call options (4)

Derivatives - put options (4)

Derivatives - loan commitments (4)

$ 345,895,012

$ 146,704,995

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 AND SUBSIDIARIES

2 unchanged sentences

Fair Value of Financial Instruments (Continued)

Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2023, the significant unobservable inputs

used in the fair value measurements were as follows:

Assets and Liabilities Measured at Fair Value on A Recurring Basis

Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2023, the significant unobservable inputs used

in the fair value measurements were as follows:

of Assets and Liabilities Measured at Fair Value on A Recurring Basis

Range of Inputs

Fair Value at

June 30, 2023

Loans held for sale

1 unchanged sentence

Market approach

Investor contract pricing as a percentage

of unpaid principal balance

Investor contract pricing as a percentage of unpaid principal balance

Derivatives - loan commitments (net)

8 unchanged sentences

Fair Value at

Range of Inputs

Loans held for sale

1 unchanged sentence

Market approach

Investor contract pricing as a percentage

of unpaid principal balance

Investor contract pricing as a percentage of unpaid principal balance

Derivatives - loan commitments (net)

8 unchanged sentences

30, 2023 (Unaudited)

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

three month periods ended March 31, 2023:

six month periods ended June 30, 2023:

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

5 unchanged sentences

Originations and purchases

1,139,735,241

Sales, maturities and paydowns

( 1,140,477,623 )

Transfer to mortgage loans held for investment

( 1,150,074 )

Total gains (losses):

2 unchanged sentences

Included in other comprehensive income

Balance - March 31, 2023

Balance - June 30, 2023

$ 161,310,060

As a component of Mortgage fee income on the condensed consolidated

statements of earnings

As a component of Net investment income on the condensed consolidated

statements of earnings

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

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

three month periods ended March 31, 2022:

six month periods ended June 30, 2022:

Net Loan Commitments

10 unchanged sentences

44,599,989 (1)

Included in other comprehensive income

Balance - June 30, 2022

$ 209,860,409

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Fair Value of Financial Instruments (Continued)

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

three month periods ended June 30, 2023:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - March 31, 2023

$ 173,015,404

Originations and purchases

Sales, maturities and paydowns

( 628,567,681 )

Transfer to mortgage loans held for investment

( 1,150,074 )

Total gains (losses):

Included in earnings

( 151,382 )(1)

10,144,966 (1)

Included in other comprehensive income

Balance - June 30, 2023

$ 161,310,060

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

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

three month periods ended June 30, 2022:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - March 31, 2022

$ 234,012,872

As a component of Mortgage fee income on the condensed consolidated

statements of earnings

As a component of Net investment income on the condensed consolidated

statements of earnings

Originations and purchases

1,010,742,878

Sales, maturities and paydowns

( 1,055,390,037 )

Total gains (losses):

Included in earnings

( 2,247,244 )(1)

20,494,696 (1)

Included in other comprehensive income

Balance - June 30, 2022

$ 209,860,409

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

Value of Financial Instruments (Continued)

Company didn’t have any financial assets and financial liabilities measured at fair value on a nonrecurring basis at March 31,

Fair Value of Financial Instruments (Continued)

Company did not have any financial assets and financial liabilities measured at fair value on a nonrecurring basis at June 30, 2023.

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

14 unchanged sentences

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

necessarily indicative of the amounts the Company could have realized in a sales transaction at March 31, 2023 and December 31, 2022.

necessarily indicative of the amounts the Company could have realized in a sales transaction at June 30, 2023 and December 31, 2022.

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

are summarized as follows as of March 31, 2023:

are summarized as follows as of June 30, 2023:

Schedule of Financial Instruments Carried at Other Than Fair Value

23 unchanged sentences

( 124,475,238 )

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

Mortgage loans held for investment

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

(1) Included in other

investments and policy loans on the condensed consolidated balance sheets

(2) Mortgage loans

held for investment

(3) Included in future

policy benefits and unpaid claims on the condensed consolidated balance sheets

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

24 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

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

22 unchanged sentences

30, 2023 (Unaudited)

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

and Other Loans Payable :

14 unchanged sentences

to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.

9) Derivative

Derivative Instruments

Banking Derivatives

48 unchanged sentences

of Derivative Assets at Fair Value

March 31, 2023

June 30, 2023

December 31, 2022

15 unchanged sentences

$ 454,894,908

following table presents the gains on derivatives.

There were no gains or losses reclassified from accumulated other comprehensive income

into income or gains or losses recognized in income on derivatives ineffective portion, or any amounts excluded from effective testing.

table below presents the gains (losses) on derivatives.

There were no gains or losses reclassified from accumulated other comprehensive

income into income or gains or losses recognized in income on derivatives ineffective portion, or any amounts excluded from effective

Schedule of Gains and Losses on Derivatives

Net Amount Gain (Loss)

Three Months Ended March 31

Net Amount Gain (Loss)

Three Months Ended June 30,

Six Months Ended June 30,

Classification

1 unchanged sentence

Mortgage fee income

$ ( 151,382 )

$ ( 2,247,244 )

Call and put options

3 unchanged sentences

30, 2023 (Unaudited)

10) Reinsurance,

Commitments and Contingencies

Reinsurance, Commitments and Contingencies

Company follows the procedure of reinsuring risks in excess of a specified limit, which ranges from $ 25,000 to $ 100,000 .

12 unchanged sentences

The agreement

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

SecurityNational Mortgage is required to comply with

covenants for adjusted tangible net worth, unrestricted cash balance, the ratio of indebtedness to adjusted tangible net worth, and the

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

charges interest at the 1-Month SOFR rate plus 2.1% and expires on December 31, 2023 and will not be renewed as a result of the lender

exiting the market place.

SecurityNational Mortgage is required to comply with covenants for adjusted tangible net worth, unrestricted

cash balance, the ratio of indebtedness to adjusted tangible net worth, and the liquidity overhead coverage ratio, and a quarterly gross

profit of at least $ 1.00 .

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

10 unchanged sentences

The agreement charges interest

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

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.

at the 1-Month SOFR rate plus 2.50% and expires on December 31, 2023 and will not be renewed as a result of the lender exiting the market

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.

Company through its subsidiary SecurityNational Mortgage, has a line of credit with U.S Bank.

2 unchanged sentences

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 .

greater of (i) 0% , and (ii) the one-month forward-looking term rate based on SOFR and matures on December 1, 2023 .

The Company is required

1 unchanged sentence

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

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

covenant violation under the other agreement.

As of March 31, 2023, the Company was not in compliance with the net income covenant

on its warehouse line with U.S.

Bank and has received or is in the process of receiving waivers from the warehouse banks.

unlikely event the Company is required to repay the outstanding advances of approximately $ 8,900,000

on the Texas Capital Bank N.A.

warehouse line that has not provided a covenant waiver, the Company has sufficient cash and borrowing

capacity on the warehouse lines that have provided covenant waivers to fund its origination activities.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

10) Reinsurance,

Commitments and Contingencies

Reinsurance, Commitments and Contingencies (Continued)

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

violation under the other agreement.

As of June 30, 2023, the Company was not in compliance with the net income covenant and has received

or is in the process of receiving waivers from the warehouse banks.

In the unlikely event the Company is required to repay the outstanding

advances of approximately $ 7,100,000 on the warehouse line that has not provided a covenant waiver, the Company has sufficient cash and

borrowing capacity on the warehouse lines that have provided covenant waivers to fund its origination activities.

The Company has performed

an internal analysis of its funding capacities of both internal and external sources and has determined that there are sufficient funds

to continue its business model.

The Company continues to negotiate other warehouse lines with other lenders.

Contingencies and Commitments

1 unchanged sentence

and development.

As of March 31, 2023, the Company’s commitments were approximately $ 192,542,000 for these loans, of which $ 151,740,182

As of June 30, 2023, the Company’s commitments were approximately $ 170,804,000 for these loans, of which $ 124,975,445

had been funded.

28 unchanged sentences

30, 2023 (Unaudited)

Servicing Rights

Mortgage Servicing Rights

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

14 unchanged sentences

of Mortgage Servicing Rights

As of March 31

As of June 30,

As of December 31,

5 unchanged sentences

( 51,185,906 )

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 before valuation allowance at end of period

1 unchanged sentence

Balance at beginning of year

Application of valuation allowance to write down MSRs with

other than temporary impairment

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

Balance at end of period

1 unchanged sentence

Estimated fair value of MSRs at end of period

Included in mortgage fee income on the condensed consolidated

statements of earnings

Included in other expenses on the condensed consolidated statements

(1) Included in mortgage

fee income on the condensed consolidated statements of earnings

(2) Included in other

expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

Servicing Rights

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

11) Mortgage Servicing

Rights (Continued)

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

This projection

was developed using the assumptions made by management in its March 31, 2023 valuation of MSRs.

was developed using the assumptions made by management in its June 30, 2023 valuation of MSRs.

The assumptions underlying the following

8 unchanged sentences

Three Months Ended

Six Months Ended

Contractual servicing fees

1 unchanged sentence

of Unpaid Principal Balances of the Servicing Portfolio

As of March 31

As of June 30,

As of December 31, 2022

4 unchanged sentences

of Assumptions Used in Determining MSR Value

March 31, 2023

June 30, 2023

December 31, 2022

7 unchanged sentences

Company completed the physical transfer of files prior to its deadline.

The Company received half of the holdbacks in the first quarter

of 2023 and anticipates the release of the remaining holdbacks in the second quarter of 2023.

The holdbacks have been received in 2023.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

Company’s overall effective tax rate for the three month periods ended March 31, 2023 and 2022 was 21.8 % and 27.3 %, respectively,

which resulted in a provision for income taxes of $ 344,716 and $ 1,214,798 , respectively.

The Company’s effective tax rates differ

from the U.S.

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

The decrease in the effective tax

rate when compared to the prior year is partially due to the Company’s provision for state income taxes.

Company’s overall effective tax rate for the three month periods ended June 30, 2023 and 2022 was 22.0 % and 24.4 %, respectively,

which resulted in a provision for income taxes of $ 1,796,627 and $ 1,155,397 , respectively, and for the six month periods ended June 30,

2023 and 2022 was 22.0 % and 25.8 %, respectively, which resulted in a provision for income taxes of $ 2,141,343 and $ 2,370,195 , respectively

The Company’s effective tax rate differs from the U.S.

federal statutory rate of 21 % due to its benefit for state income

taxes, along with certain permanent tax adjustments such as meals and entertainment

and stock-based compensation.

The decrease in the effective tax rate when compared to the prior year is primarily due to the Company’s state

income tax provision.

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

43 unchanged sentences

Contract Liability

Opening (1/1/2023)

Closing (3/31/2023)

Opening (January 1, 2023)

Closing (June 30, 2023)

Increase/(decrease)

3 unchanged sentences

Contract Liability

Opening (1/1/2022)

Closing (12/31/2022)

Opening (January 1, 2022)

Closing (December 31, 2022)

Increase/(decrease)

Included in Receivables, net on the condensed consolidated

balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three month periods ended March 31, 2023

and 2022 was $ 1,119,898 and $ 1,064,104 , respectively.

(1) Included in Receivables, net on the condensed consolidated balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three month periods ended June 30, 2023 and

2022 was $ 1,116,566 and $ 1,526,324 , respectively, and for the six month periods ended June 30, 2023 and 2022 was $ 2,236,898 and $ 2,590,428 ,

respectively.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Major goods/service lines

12 unchanged sentences

Three Months Ended

Six Months Ended

Net mortuary and cemetery sales

5 unchanged sentences

Schedule of Receivables

As of March 31, 2023

As of June 30, 2023

As of December 31, 2022

13 unchanged sentences

( 651,308 )(1)

Ending balance - March 31, 2023

Ending balance - June 30, 2023

Beginning balance - January 1, 2022

1 unchanged sentence

Ending balance - December 31, 2022

Included in other expenses on the condensed consolidated statements

(1) Included in other expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

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

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

Perpetual Care Trust Investments and Obligation

7 unchanged sentences

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

components of the cemetery perpetual care investments and obligation as of March 31, 2023, are as follows:

components of the cemetery perpetual care investments and obligation as of June 30, 2023, are as follows:

of Investments

4 unchanged sentences

Estimated Fair Value

March 31, 2023:

June 30, 2023:

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

2 unchanged sentences

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

18 unchanged sentences

30, 2023 (Unaudited)

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

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

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

24 unchanged sentences

Maturity Securities

following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at March 31, 2023

and at December 31, 2022.

table below summarizes unrealized losses on fixed maturities securities that were carried at estimated fair value at June 30, 2023 and

at December 31, 2022.

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

5 unchanged sentences

Total Unrealized Loss

At March 31, 2023

At June 30, 2023

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

7 unchanged sentences

30, 2023 (Unaudited)

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

were 3 securities with fair value of 96.6 % of aggregate amortized cost at March 31, 2023.

There were 5 securities with fair value of

96.4 % of aggregate amortized cost at December 31, 2022.

No credit losses have been recognized for the three month periods ended March

31, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent rise in interest rates and inflation.

following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2023,

by contractual maturity.

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

holdings were comprised of 5 securities with fair value of 97.2 % of amortized cost at June 30, 2023.

Relevant holdings were comprised

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

No credit losses have been recognized for the three

and six month periods ended June 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increases

in interest and inflation rates.

table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2023, by

contractual maturity.

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

14 unchanged sentences

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

assets as of March 31, 2023, are summarized as follows:

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

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

assets as of June 30, 2023, are summarized as follows:

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

4 unchanged sentences

Estimated Fair Value

March 31, 2023:

June 30, 2023:

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

13 unchanged sentences

Total restricted assets

Including cash and cash equivalents of $ 8,232,615 for the life

insurance and mortgage segments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

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

(1) Including cash and cash equivalents of $ 8,006,323 or the life insurance and mortgage segments.

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

18 unchanged sentences

Total restricted assets

Including cash and cash equivalents of $ 8,527,620 for the life

insurance and mortgage segments.

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

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

Maturity Securities

following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at March 31, 2023

and at December 31, 2022.

table below summarizes unrealized losses on fixed maturities securities that were carried at estimated fair value at June 30, 2023 and

at December 31, 2022.

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

5 unchanged sentences

Total Unrealized Loss

At March 31, 2023

At June 30, 2023

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

5 unchanged sentences

Total unrealized losses

were 17 securities with fair value of 98.7 % of aggregate amortized cost at March 31, 2023.

There were 17 securities with fair value of

98.2 % of aggregate amortized cost at December 31, 2022.

No credit losses have been recognized for the three month periods ended March

31, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent rise in interest rates and inflation.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

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 March 31, 2023,

by contractual maturity.

holdings were comprised of 18 securities with fair value of 98.6 % of amortized cost at June 30, 2023.

Relevant holdings were comprised

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

No credit losses have been recognized for the three

and six month periods ended June 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increase

in interest and inflation rates.

table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2023, by

contractual maturity.

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

8 unchanged sentences

Notes 3 and 8 for additional information regarding restricted assets and cemetery perpetual care trust investments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Accumulated Other Comprehensive Income (loss)

1 unchanged sentence

Schedule of Changes in Accumulated Other Comprehensive Income

Three Months Ended March 31

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

Three Months Ended June 30,

Six Months Ended June 30,

Unrealized gains (losses) on fixed maturity securities

available for sale

$ ( 4,913,327 )

$ ( 13,114,816 )

$ ( 28,486,911 )

Amounts reclassified into net earnings

1 unchanged sentence

( 4,993,177 )

Tax (expense) benefit

( 12,995,132 )

( 28,322,034 )

Unrealized gains (losses) on restricted assets (1)

Tax (expense) benefit

Unrealized gains (losses) on cemetery perpetual care trust investments (1)

Tax (expense) benefit

( 3,944,610 )

( 10,266,155 )

( 22,374,407 )

Unrealized losses on restricted assets (1)

Unrealized losses on cemetery perpetual care

trust investments (1)

Other comprehensive income (loss) changes

$ ( 3,952,052 )

$ ( 10,310,485 )

$ ( 22,500,815 )

(1) Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2023 (Unaudited)

16) Accumulated Other Comprehensive Income (loss) (Continued)

following is the accumulated balances of other comprehensive income (loss) as of March 31, 2023:

following is the accumulated balances of other comprehensive income (loss) as of June 30, 2023:

Schedule of Accumulated Balances of Other Comprehensive Income

1 unchanged sentence

Change for the period

Ending Balance March 31,

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

Ending Balance

Unrealized gains (losses) on fixed maturity securities

available for sale

$ ( 13,050,767 )

$ ( 12,873,134 )

Unrealized gains (losses) on restricted assets (1)

Unrealized gains (losses) on cemetery perpetual care trust investments (1)

Unrealized losses on restricted assets (1)

Unrealized losses on cemetery perpetual

care trust investments (1)

Other comprehensive income (loss)

4 unchanged sentences

Beginning Balance December 31, 2021

Change for the period

Ending Balance December 31,

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

Change for the

Ending Balance

Unrealized gains (losses) on fixed maturity securities

available for sale

$ ( 31,072,032 )

1 unchanged sentence

Unrealized gains (losses) on restricted assets (1)

Unrealized gains (losses) on cemetery perpetual care trust investments (1)

Unrealized gains (losses) on cemetery perpetual

care trust investments

Other comprehensive income (loss)

3 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-Q

Item 1. Financial Statements