What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 920 added, 785 removed, 1730 unchanged (50% of the section changed)

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)

maturity securities, available for sale, at estimated fair value (amortized cost of $ 380,283,562 and $ 362,750,511 for 2023 and 2022, respectively;

net of allowance for credit losses of $ 211,500 and nil for 2023 and 2022, respectively)

$ 356,448,259

$ 345,858,492

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)

Equity securities at

estimated fair value (cost of $ 10,470,974 and $ 9,942,265 for 2023 and 2022, respectively)

Mortgage loans held

for investment (net of allowance for credit losses of $ 2,612,944 and $ 1,970,311 for 2023 and 2022, respectively)

Real estate held for

investment (net of accumulated depreciation of $ 28,516,470 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 $ 1,690,693 and $ 1,609,951 for 2023 and 2022, respectively)

Accrued investment income

Other investments and

policy loans (net of allowance for credit losses of $ 1,555,261 and $ 1,609,951 for 2023 and 2022, respectively)

investment income

Total investments

1 unchanged sentence

Loans held for sale at estimated fair value

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)

Receivables (net of allowance for credit

losses of $ 1,520,801 and $ 2,229,791 for 2023 and 2022, respectively)

Restricted assets (including $ 7,847,136

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

net of allowance for credit losses of $ 2,232 and

nil for 2023 and 2022, respectively)

Cemetery perpetual care trust investments

(including $ 4,223,197 and $ 3,859,893 for 2023 and 2022, respectively, at estimated fair value;

net of allowance for credit

losses of $ 3,933 and nil for 2023 and 2022, respectively)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition costs

Deferred policy and pre-need contract acquisition

Mortgage servicing rights, net

6 unchanged sentences

CONSOLIDATED BALANCE SHEETS (Continued)

June 30, 2023 (Unaudited)

December 31, 2022

Liabilities and Stockholders’ Equity

Future policy benefits and unpaid claims

Liabilities and Stockholders’

Future policy benefits and unpaid

$ 908,917,966

2 unchanged sentences

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract revenues

Deferred pre-need cemetery and mortuary contract

Cemetery perpetual care obligation

5 unchanged sentences

Stockholders’ Equity

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

Preferred Stock - non-voting - $ 1.00 par

5,000,000 shares authorized;

2 unchanged sentences

40,000,000 shares authorized;

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;

20,007,611 shares issued and outstanding as of September 30, 2023 and 18,758,031 shares issued

and outstanding as of December 31, 2022

non-voting common stock - $ 1.00

5,000,000 shares authorized;

none issued or outstanding

convertible common stock - $ 2.00 par value;

convertible common stock - $ 2.00

6,000,000 shares authorized;

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

2,971,854 shares issued and outstanding as of September 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 taxes

Accumulated other comprehensive loss, net of

( 18,282,298 )

1 unchanged sentence

Retained earnings

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

Treasury stock at

cost - 870,523 Class A shares and 35,717 Class C shares as of September 30, 2023;

and 525,870 Class A shares and 34,016 Class

C shares as of December 31, 2022

( 6,090,935 )

( 4,366,651 )

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

Total stockholders’

Liabilities and Stockholders’ Equity

$ 1,413,772,235

3 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

Mortgage fee income

$ 118,983,231

Insurance premiums and other considerations

1 unchanged sentence

Net mortuary and cemetery sales

Gains (losses) on investments and other assets

Losses on investments and other assets

( 2,178,952 )

( 2,921,372 )

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

Earnings before income taxes

Income tax expense

Earnings (loss) before income

( 3,302,344 )

Income tax benefit (expense)

( 1,117,397 )

1 unchanged sentence

( 1,421,036 )

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

Net earnings (loss)

$ ( 2,353,185 )

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

earnings (loss) 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)

(1) Net earnings per

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

$ ( 2,353,185 )

Other comprehensive income:

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

Unrealized losses on

fixed maturity securities

available for sale

$ ( 6,805,602 )

1 unchanged sentence

( 6,580,750 )

Unrealized losses on restricted assets ( 1 )

Unrealized losses on cemetery perpetual care trust investments

Other comprehensive income (loss), before income tax

( 41,845,274 )

Unrealized gains (losses)

on restricted assets (1)

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

comprehensive loss, before income tax

( 6,820,373 )

( 13,467,249 )

Income tax (expense) benefit

Other comprehensive income (loss), net of income tax

( 6,598,389 )

( 41,957,626 )

Other comprehensive

loss, net of income tax

( 5,387,527 )

Comprehensive income (loss)

( 10,641,313 )

( 5,212,021 )

(1) Fixed maturity

securities available for sale

( 33,142,128 )

Comprehensive income

$ ( 1,346,234 )

$ ( 12,994,498 )

$ ( 28,692,146 )

Fixed maturity securities available for sale

accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

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

Months Ended September 30, 2023

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

January 1, 2023

3 unchanged sentences

$ 292,786,927

Cumulative effect adjustment upon

adoption of new accounting

standard (ASU 2016-13)

Other comprehensive gain

Cumulative effect adjustment upon adoption

of new accounting standard (ASU 2016-13)

Other comprehensive income

Stock-based compensation expense

4 unchanged sentences

( 1,204,357 )

Conversion Class C to Class A

Conversion Class C to

March 31, 2023

21 unchanged sentences

$ 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

Other comprehensive loss

( 5,387,527 )

Stock-based compensation expense

Exercise of stock options

Vesting of restricted stock units

Sale of treasury stock

Purchase of treasury stock

Conversion Class C to Class A

Stock dividends

September 30, 2023

$ ( 18,282,298 )

$ 204,117,486

$ ( 6,090,935 )

$ 297,893,544

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

Months Ended September 30, 2022

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

January 1, 2022

9 unchanged sentences

Purchase of treasury stock

Conversion Class C to Class A

Conversion Class C to

March 31, 2022

5 unchanged sentences

( 10,310,485 )

Other comprehensive gain (loss)

( 10,310,485 )

Stock-based compensation expense

12 unchanged sentences

$ 280,485,055

accompanying notes to condensed consolidated financial statements (unaudited).

$ ( 4,430,367 )

$ 183,273,171

$ ( 6,229,574 )

$ 280,485,055

( 2,353,185 )

Net earnings (loss )

( 2,353,185 )

Other comprehensive loss

( 10,641,313 )

Other comprehensive income (loss)

( 10,641,313 )

Stock-based compensation expense

Sale of treasury stock

Conversion Class C to

September 30, 2022

$ ( 15,071,680 )

$ 180,919,986

$ ( 5,041,822 )

$ 268,861,877

$ ( 15,071,680 )

$ 180,919,986

$ ( 5,041,822 )

$ 268,861,877

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Cash flows from operating activities:

Net cash provided by operating activities

Cash flows from investing activities:

Months Ended September 30,

Cash flows from operating

cash provided by operating activities

$ 109,318,230

Cash flows from investing

Purchases of fixed maturity securities

1 unchanged sentence

( 115,680,915 )

Sales, calls and maturities of fixed maturity securities

Sales, calls and maturities of fixed maturity

Purchases of equity securities

2 unchanged sentences

Sales of equity securities

Net changes in restricted assets

Purchases of restricted assets

( 1,836,290 )

( 1,157,021 )

Sales, calls and maturities of restricted assets

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

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

( 467,172,350 )

( 569,434,389 )

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

Net cash provided by (used in) investing activities

cash provided by (used in) investing activities

( 96,403,904 )

Cash flows from financing activities:

Cash flows from financing

Investment contract receipts

10 unchanged sentences

Proceeds from bank loans

Net change in warehouse line borrowings for loans held for sale

( 55,805,126 )

Net change in warehouse

line borrowings for loans held for sale

( 52,720,401 )

Net cash used in financing activities

( 61,081,557 )

cash used in financing activities

( 58,465,601 )

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

( 60,107,391 )

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

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

( 47,193,065 )

Cash, cash equivalents,

restricted cash and restricted cash equivalents at beginning of period

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

$ 147,122,807

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

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

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

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

Accrued real estate construction costs and retainage

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

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

flows is presented in the table below:

Six Months Ended June 30,

Months Ended September 30,

Cash and cash equivalents

$ 134,751,854

$ 131,296,538

Restricted assets

Cemetery perpetual care trust investments

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

$ 121,640,460

Cemetery perpetual care

trust investments

Total cash, cash equivalents,

restricted cash and restricted cash equivalents

$ 147,122,807

1 unchanged sentence

$ 147,122,807

$ 142,406,108

accompanying notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

30, 2023 (Unaudited)

of Presentation

Basis of Presentation

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

1 unchanged sentence

10 of Regulation S-X.

Accordingly, they do not include all of the information and disclosures required by accounting principles generally

Accordingly, they do not include all the information and disclosures required by accounting principles generally

accepted in the United States of America for complete financial statements.

4 unchanged sentences

considered necessary for a fair presentation have been included.

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

Operating results for the three and nine month periods ended September

30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

25 unchanged sentences

Normal banking activities resumed shortly thereafter.

On May 1, 2023, First Republic bank was placed

in receivership with the FDIC and was immediately purchased by a national bank.

On May 1, 2023, First Republic Bank was placed in receivership

with the FDIC and was immediately purchased by a national bank.

Company does not maintain any deposit or other accounts or credit facilities with Silicon Valley Bank, Signature Bank or First Republic

6 unchanged sentences

30, 2023 (Unaudited)

Accounting Pronouncements

Recent Accounting Pronouncements

Standards Adopted in 2023

2 unchanged sentences

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

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

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

For assets held at an 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

10 unchanged sentences

Residential construction

Restriced assets - mortgage loans held for investment:

Residential construction

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

Residential construction

Restriced assets - mortgage loans held for

Cemetery perpetual care trust investments -

mortgage loans held for investment:

Standards Issued But Not Yet Adopted

5 unchanged sentences

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

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

required disclosures.

2 unchanged sentences

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.

The Company is nearing completion of its analysis and implementation of the new standard, including

the identification of cohorts, system updates, design and a preliminary analysis of the Company’s “Cold Start.” The

Company has engaged its team of actuaries, accountants, and systems specialists and consulted external system providers as part of the

implementation.

The Company is in the process of estimating the impact of the new guidance 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)

3) Investments

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

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

of Investments

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.

Unrealized Gains

Unrealized Losses (1)

for Credit Losses

September 30,

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Government agencies

$ 108,680,913

Obligations of states and political subdivisions

Corporate securities including public utilities

$ ( 2,498,554 )

$ 106,188,340

Obligations of states and

political subdivisions

Corporate securities including

public utilities

( 15,412,932 )

Mortgage-backed securities

( 5,755,224 )

Redeemable preferred stock

Total fixed maturity securities available for sale

preferred stock

fixed maturity securities available for sale

$ 380,283,562

4 unchanged sentences

Common stock:

Industrial, miscellaneous and all other

Industrial, miscellaneous

and all other

$ ( 846,350 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 846,350 )

Mortgage loans held for investment at amortized cost:

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred loan fees, net

Unamortized deferred

loan fees, net

( 1,629,546 )

Allowance for credit losses

Allowance for credit

( 2,612,944 )

Net discounts

Total mortgage loans held for investment

Total mortgage loans

held for investment

$ 249,307,098

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

Real estate held for investment - net of accumulated

depreciation:

Total real estate

held for investment

$ 184,691,463

Real estate held for sale:

Total real estate held for sale

Other investments and policy loans at amortized cost:

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank stock (2)

Federal Home Loan Bank

Other investments

1 unchanged sentence

( 1,555,261 )

Total other investments and policy loans

Accrued investment income

Total other investments

and policy loans

Accrued investment

Total investments

$ 886,040,843

(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.

unrealized losses are net of allowance for credit losses

(2) Includes $ 978,600 of Membership

stock and $ 1,720,700 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:

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.

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

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 )

1 unchanged sentence

( 4,100,674 )

Redeemable preferred stock

Total fixed maturity securities available for sale

preferred stock

fixed maturity securities available for sale

$ 362,750,511

3 unchanged sentences

Common stock:

Industrial, miscellaneous and all other

Industrial, miscellaneous

and all other

$ ( 948,114 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 948,114 )

Mortgage loans held for investment at amortized cost:

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred loan fees, net

Unamortized deferred

loan fees, net

( 1,746,605 )

Allowance for credit losses

Allowance for credit

( 1,970,311 )

Net discounts

Total mortgage loans held for investment

Total mortgage loans

held for investment

$ 308,123,927

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

Real estate held for investment - net of accumulated

depreciation:

Total real estate

held for investment

$ 191,328,616

Real estate held for sale:

Total real estate held for sale

Other investments and policy loans at amortized cost:

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank stock (1)

Federal Home Loan Bank

Other investments

1 unchanged sentence

( 1,609,951 )

Total other investments and policy loans

Accrued investment income

Total other investments

and policy loans

Accrued investment

Total investments

$ 948,963,125

(1) Includes $ 938,500

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

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

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.

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

For fixed maturity securities not actively

traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are

estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of

the investments.

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

of September 30, 2023, and December 31, 2022.

The unrealized losses were primarily related to interest rate fluctuations.

The fair values

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

For fixed maturity securities not actively traded, fair

values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by

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

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

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

Combined Fair Value

At June 30, 2023

Treasury Securities And Obligations of U.S.

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

September 30, 2023

Treasury Securities And Obligations

Government Agencies

$ 106,083,141

Obligations of States and Political Subdivisions

Corporate Securities

Mortgage and other asset-backed securities

Mortgage and other asset-backed

$ 128,622,664

1 unchanged sentence

$ 330,783,177

At December 31, 2022

Treasury Securities And Obligations of U.S.

December 31, 2022

Treasury Securities And Obligations of

Government Agencies

1 unchanged sentence

Corporate Securities

Mortgage and other asset-backed securities

Mortgage and other asset-backed

$ 267,774,539

$ 280,964,126

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

Note 2 regarding the adoption of ASU 2016-13.

a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale to identify any potential credit

This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”).

Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for credit loss, unless current market or recent

company news could lead to a credit downgrade.

Securities with ratings of 3 to 5 are evaluated for credit loss.

Securities with a rating

of 6 are automatically determined to be impaired and a credit loss is recognized in earnings.

The evaluation involves assessing all facts

and circumstances surrounding each security including, but not limited to, historical values, interest payment history, projected earnings,

and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating.

Based on the analysis of a security that

is rated 3 to 5, a determination is made whether the security will likely make interest and principal payments in accordance with the

terms of the financial instrument.

holdings were comprised of 816 securities with fair values aggregating 93.2 % of the aggregate amortized cost as of September 30, 2023.

Relevant holdings were comprised of 703 securities with fair values aggregating 93.1 % of the aggregate amortized cost as of December

Credit loss provision (release) of $( 1,741 ) and nil have been recognized for the three month periods ended September 30, 2023

and 2022, respectively.

Credit loss provision (release) of $ 222,264 and nil have been recognized for the nine month periods ended September

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 rates.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

of Allowance for Credit Losses

Note 2 regarding the adoption of ASU 2016-13.

a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale to identify any potential credit

This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”)

and other industry rating agencies.

Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for credit

loss, unless current market data or recent company news could lead to a credit downgrade.

Securities with ratings of 3 to 5 are evaluated

for credit loss.

The evaluation involves assessing all facts and circumstances surrounding each security including, but not limited to,

historical values, interest payment history, projected earnings, and revenue growth rates as well as a review of the reason for a downgrade

in the NAIC rating.

Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely

make interest and principal payments in accordance with the terms of the financial instrument.

Securities with a rating of 6 are automatically

determined to be impaired and a credit loss is recognized in earnings.

the decline in fair value of fixed maturity securities is attributable to changes in market interest rates or to factors such as market

6 unchanged sentences

on the condensed consolidated statements of earnings.

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.

The credit loss is included in

gains (losses) on investments and other assets on the condensed consolidated statements of earnings.

The recognized credit loss is limited

to the total unrealized loss on the security due to a change in credit.

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

debt security but the Company also does 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

The credit loss is included in gains (losses) on investments and other assets on the condensed consolidated statements of

The recognized credit loss is limited to the total unrealized loss on the security due to a change in credit.

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

4 unchanged sentences

(after 90 days) when the Company has concerns regarding collectability.

following table presents a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

Quality Indicators

NAIC assigns designations to fixed maturity securities.

These designations range from Class 1 (highest quality) to Class 6 (lowest quality).

The NAIC designations are utilized by insurers in preparing their annual statutory statements.

NAIC Class 1 and 2 are considered investment

grade while the NAIC Class 3 through 6 designations are considered non-investment grade.

Based on the NAIC designations,

the Company had 98.2 % and 97.7 % of its fixed maturity securities rated investment grade as of September 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.

of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

$ 210,224,246

$ 198,601,878

$ 197,753,818

$ 189,691,540

$ 380,033,562

$ 356,188,259

$ 362,500,511

$ 345,598,492

following tables presents a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for

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

Six Months Ended June 30, 2023

Months Ended September 30, 2023

Treasury Securities And Obligations of U.S.

Government Agencies

Obligations of states and political subdivisions

Corporate securities

Mortgage-backed securities

Beginning balance

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

of states and political subdivisions

Mortgage-backed

Beginning balance - December 31, 2022

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

of amounts previously written off

Ending Balance - September 30, 2023

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

Months Ended September 30, 2023

Treasury Securities And Obligations of U.S.

Government Agencies

of states and political subdivisions

Mortgage-backed

Beginning balance - June 30, 2023

Beginning balance

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

of amounts previously written off

Ending Balance - September 30, 2023

Ending balance

following table presents a roll forward of the Company’s cumulative other than temporary credit impairments (“OTTI”)

1 unchanged sentence

of Earnings on Fixed Maturity Securities

Balance of credit-related OTTI at January 1

Additions for credit impairments recognized on:

Securities not previously impaired

Balance of credit-related OTTI

Additions for credit impairments recognized

Securities not previously

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,

Reductions for credit impairments previously

recognized on:

Securities that matured

or were sold during the period (realized)

due to an increase in expected cash flows

Balance of credit-related

OTTI at September 30

table below presents the amortized cost and the estimated fair value of fixed maturity securities available for sale as of September

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.

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

Redeemable preferred stock

Redeemable preferred

$ 380,283,562

$ 356,448,259

Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”).

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

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

Quality Indicators

NAIC assigns designations to fixed maturity securities.

These designations range from Class 1 (highest quality) to Class 6 (lowest quality).

The NAIC designations are utilized by insurers in preparing their annual statutory statements.

NAIC Class 1 and 2 are considered “investment

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

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)

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

$ 195,622,815

$ 197,753,818

$ 189,691,540

$ 371,481,265

$ 354,529,812

$ 362,500,511

Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”).

The Company had pledged a total of $ 92,437,113 ,

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

These pledged securities are used as collateral

for any FHLB cash advances.

As of September 30, 2023, the Company owed nil to the FHLB and its estimated maximum borrowing capacity was

$ 85,218,402 .

1 unchanged sentence

of Major Categories of Net Investment Income

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

Proceeds from sales

1 unchanged sentence

Gross realized losses

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 June 30, 2023, other than investments issued or guaranteed by the United States Government.

on deposit with life insurance regulatory authorities as required by law were as follows:

of Assets on Deposit With Life Insurance

Fixed maturity securities available

Cash and cash equivalents

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

equity securities and fixed maturity securities) as of September 30, 2023, other than investments issued or guaranteed by the United

States Government.

Estate Held for Investment and Held for Sale

13 unchanged sentences

or through strategic lease-up periods.

The Company generally looks to acquire assets that are located in regions expected to have high

growth in employment and population and that provide operational efficiencies.

The Company generally looks to acquire assets that are in regions expected to have high growth

in employment and population and that provide operational efficiencies.

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

8 unchanged sentences

Investments (Continued)

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

aggregated net book value of commercial real estate serving as collateral for bank loans was $ 125,641,402 and $ 129,330,119 as of September

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

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

The associated bank loan carrying values totaled $ 98,250,725 and $ 97,112,131 as of September

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

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.

the three and nine month periods ended September 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 September 30, 2023, and 2022, the Company recorded depreciation expense on commercial real estate held

for investment of $ 1,572,494 and $ 1,604,195 , respectively, and of $ 4,715,322 and $ 4,593,468 during the nine month periods ended September

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

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

of Commercial Real Estate Investment

Net Book Value

Total Square Footage

June 30, 2023

December 31, 2022

June 30, 2023

December 31, 2022

Square Footage

$ 143,735,609

4 unchanged sentences

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

Square Footage

Mississippi (1)

Consists of approximately 93 acres of undeveloped land

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

Consists of approximately 93

acres of undeveloped land

properties are being marketed with the assistance of commercial real estate brokers in Mississippi and Louisiana.

Real Estate Held for Investment and Held for Sale

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

The Company has the

option to sell these properties or to continue to hold them for expected cash flow and price appreciation.

The Company also invests in

residential subdivision development.

Company occasionally acquires a small portfolio of residential homes primarily because of loan foreclosures.

The Company has the option

to sell these properties or to continue to hold them for expected cash flow and price appreciation.

The Company also invests in residential

subdivision development.

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

6 unchanged sentences

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.

the three and nine month periods ended September 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 September 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 $ 7,944 and $ 7,944 during the nine month periods ended September 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.

1 unchanged sentence

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

June 30, 2023

December 31, 2022

2,285,707 (1)

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.

September 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 June 30, 2023, real estate owned

and occupied by the Company is summarized as follows:

As of September 30, 2023, real estate

owned and occupied by the Company is summarized as follows:

of Real Estate Owned and Occupied by the Company

Business Segment

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

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, MS (1)

10 unchanged sentences

consolidated balance sheets

Included in property and equipment on the condensed consolidated

balance sheets

Included in property and equipment on the condensed consolidated balance sheets

Loans Held for Investment

9 unchanged sentences

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.

As of September 30, 2023, the Company had 45 % , 12 % , 9 % , 7 %

and 6 % , of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, and Arizona, respectively.

of 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,

9 unchanged sentences

requires that loans not exceed 80% of the fair market value of the respective loan collateral.

For loans in excess of 80% of the fair

For loans of more than 80% of the fair

market value of the respective loan collateral, additional collateral or mortgage insurance by an approved third-party insurer is required.

21 unchanged sentences

Interest not accrued

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

on these loans totaled approximately $ 249,000 and $ 226,000 as of September 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.

1 unchanged sentence

Once foreclosed, the property is classified as real estate held for investment or held for sale.

purposes of determining the allowance for credit losses, the Company has segmented its mortgage loans held for investment by loan type.

The Company’s loan types are commercial, residential, and residential construction.

The inherent risks within the portfolio vary

depending upon the loan type as follows:

determine the allowance for credit losses, the Company has segmented its mortgage loans held for investment by loan type.

The Company’s

loan types are commercial, residential, and residential construction.

The inherent risks within the portfolio vary depending upon the

loan type as follows:

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

2 unchanged sentences

a commercial loan depends primarily on the collateral and its ability to generate income and secondarily on the borrower’s (or

guarantors) ability to repay.

guarantor’s) ability to repay.

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

15 unchanged sentences

delinquency rates and current unemployment trends.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

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

4 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

Additionally,

1 unchanged sentence

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

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 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

3 unchanged sentences

of Allowance for Loan Losses

Residential Construction

June 30, 2023

September 30, 2023

Allowance for credit losses:

Beginning balance - January 1, 2023

Cumulative effect adjustment upon adoption of

new accounting standard (ASU 2016-13)

Change in provision for credit losses

Ending balance - June 30, 2023

Cumulative effect adjustment

upon adoption of new accounting standard (ASU 2016-13) (1)

Change in provision for

credit losses (2)

Ending balance - September 30, 2023

December 31, 2022

1 unchanged sentence

Beginning balance - January 1, 2022

Change in provision for credit losses

Change in provision for

credit losses (2)

Ending balance - December 31, 2022

See Note 2 of the notes to the condensed consolidated financial

Included in other expenses on the condensed consolidated statements

See Note 2 of the notes to the condensed consolidated

financial statements

Included in other expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

4 unchanged sentences

of Aging of Mortgage Loans

June 30, 2023

30-59 days past due

September 30, 2023

60-89 days past due

Over 90 days past due (1)

In process of foreclosure (1)

Total past due

Total mortgage loans

process of foreclosure (1)

mortgage loans

Allowance for credit losses

1 unchanged sentence

( 2,612,944 )

Unamortized deferred loan fees, net

Unamortized deferred loan

( 1,129,517 )

( 1,629,546 )

Unamortized discounts, net

Net mortgage loans

discounts, net

mortgage loans held for investment

$ 100,738,702

4 unchanged sentences

Over 90 days past due (1)

In process of foreclosure (1)

Total past due

Total mortgage loans

process of foreclosure (1)

mortgage loans

Allowance for credit losses

1 unchanged sentence

( 1,970,311 )

Unamortized deferred loan fees, net

Unamortized deferred loan

( 1,212,994 )

( 1,746,605 )

Unamortized discounts, net

Net mortgage loans

discounts, net

mortgage loans held for investment

$ 172,139,077

$ 308,123,927

Interest income is not recognized on loans which are more than

90 days past due 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

8 unchanged sentences

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

June 30, 2023:

September 30, 2023:

of Commercial Mortgage Loans By Credit Quality Indicator

Credit Quality Indicator

Quality Indicator

Less than 65%

9 unchanged sentences

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

September 30, 2023:

Quality Indicator

Performance Indicators:

1 unchanged sentence

Includes residential mortgage loans in the process of foreclosure

of $ 289,922 at June 30, 2023

of $ 276,580 as of September 30, 2023

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

7 unchanged sentences

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

Credit Quality Indicator

follows as of September 30, 2023:

Schedule of Residential Construction Mortgage Loans

Quality Indicator

Performance Indicators:

8 unchanged sentences

of Aging of Insurance Assignments

As of June 30,

As of December 31, 2022

of September 30,

of December 31,

30-59 days past due

3 unchanged sentences

Total insurance assignments

Allowance for credit losses

Allowance for credit

( 1,555,261 )

3 unchanged sentences

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.

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

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Investments (Continued)

following table presents a roll forward of the allowance for credit losses as a contra-asset account for insurance assignments:

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

of Allowance for Credit Losses

Beginning balance - January 1, 2023

Change in provision for credit losses

Ending balance - June 30, 2023

Change in provision for

credit losses ( 1 )

Ending balance - September 30, 2023

Beginning balance - January 1, 2022

Change in provision for credit losses

Change in provision for

credit losses ( 1 )

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

Related Earnings

2 unchanged sentences

of Gain (Loss) on Investments

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

Fixed maturity securities:

Gross realized gains

Gross realized

Gross realized losses

Net credit loss (provision) release

Net credit loss (provision)

Equity securities:

Gains (losses) on securities sold

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

Gains (losses) on securities

Unrealized losses on securities

held at the end of the period

( 1,321,511 )

( 1,383,627 )

( 4,097,049 )

Real estate held for investment and sale:

1 unchanged sentence

Gross realized losses

Other assets, including call and put option derivatives:

Other assets, including call and put option

Gross realized gains

Gross realized losses

realized losses

$ ( 932,414 )

$ ( 2,178,952 )

$ ( 2,921,372 )

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 $ 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.

and mortuaries of $ 452,115 and $ 640,593 in net losses for the three month periods ended September 30, 2023, and 2022, respectively, and

of $ 200,605 and $ 1,636,469 in net losses for the nine month periods ended September 30, 2023, and 2022, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

categories of net investment income were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Fixed maturity securities available for sale

Months Ended September 30,

Fixed maturity securities available

Equity securities

11 unchanged sentences

Net investment income

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

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 372,277 and $ 675,259 for the three

month periods ended September 30, 2023 and 2022, respectively, and of $ 2,224,629 and $ 1,882,502 for the nine month periods ended September

30, 2023 and 2022, respectively.

investment income on real estate consists primarily of rental revenue.

expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative

expenses relating to investment activities.

Investment expenses consist primarily of depreciation, property

taxes, operating expenses of real estate and an estimated portion of administrative expenses relating to investment activities.

Investment Income

1 unchanged sentence

of Accrued Investment Income

As of June 30,

As of December 31, 2022

Fixed maturity securities available for sale

of September 30,

of December 31,

Fixed maturity securities available

Equity securities

2 unchanged sentences

Cash and cash equivalents

Total accrued investment income

Total accrued investment

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Loans Held for Sale

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

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

See Note 8 to the

condensed consolidated financial statements for additional disclosures regarding loans held for sale.

Company’s loans held for sale portfolio is valued using the fair value option.

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 recognition of mortgage loan interest income and is included in mortgage fee income on the condensed consolidated statement

See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.

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

of Aggregate Fair Value Loans Held for Sale

As of June 30,

As of December 31, 2022

As of June 30,

As of December 31, 2022

of September 30,

of December 31,

Aggregate fair value

3 unchanged sentences

Unrealized loss

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

of mortgage loans held for sale.

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

loans held for sale.

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

of Mortgage Fee Income for Loans Held for Sale

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

Interest income

2 unchanged sentences

( 1,504,286 )

Change in fair value of loans held for sale

( 3,271,282 )

( 2,843,155 )

Change in fair value of loans held for sale

( 4,131,363 )

Provision for loan loss reserve

( 7,973,171 )

Provision (release)

for loan loss reserve

Mortgage fee income

$ 118,983,231

demands from third party investors that correspond to mortgage loans previously held for sale and sold are reviewed and relevant data

8 unchanged sentences

The Company conducts its own review upon the receipt of a repurchase demand.

In many instances, the Company is able

to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

In many instances, the Company can resolve

the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

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

of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses

As of June 30,

As of December 31,

Summary of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses

of September 30,

of December 31,

Balance, beginning of period

Provision on current loan originations (1)

Charge-offs, net of recaptured amounts

Charge-offs, net of

recaptured amounts

( 1,804,134 )

( 1,800,284 )

Balance, end of period

1 unchanged sentence

Company maintains reserves for estimated losses on current production volumes.

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

For the nine month period ended September 30, 2023, $ 770,220

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.

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.

The Company will continue to monitor data and economic conditions in order

to maintain adequate loss reserves on current production.

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

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

increase over the nine month period ended September 30, 2022, when reserves of $ 829,243 were added at a rate of 2.9 basis points per

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

The Company monitors market data and trends, economic conditions

(including forecasts) and its own experience to maintain adequate loss reserves on current production.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Stock Compensation Plans

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

Company has equity incentive plans (the “2013 Plan”, the “2014 Director Plan” and the “2022 Plan”).

based compensation expense for stock options issued of $ 145,973 and $ 230,853 has been recognized for these plans for the three month

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.

periods ended September 30, 2023, and 2022, respectively, and $ 430,856 and $ 722,775 has been recognized for these plans for the nine

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

As of September 30, 2023, the total unrecognized compensation expense related to the options issued was $ 102,775 , which

is expected to be recognized over the remaining vesting period.

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

5 unchanged sentences

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

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

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

Schedule of Activity of Stock Option Plans

Class A Shares

Weighted Average Exercise Price (2)

Average Exercise Price (2)

Class C Shares

Weighted Average Exercise Price (2)

Average Exercise Price (2)

Outstanding at January 1, 2023

Adjustment for the effect of stock dividends

Outstanding at June 30, 2023

As of June 30, 2023:

Outstanding at September 30, 2023

As of September 30, 2023:

Options exercisable

As of June 30, 2023:

Available options for future grant

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

As of September 30, 2023:

Available options for

Weighted average contractual term of options

outstanding at September 30, 2023

Weighted average contractual term of options

exercisable at September 30, 2023

Aggregated intrinsic value of options

outstanding at September 30, 2023 (1)

Aggregated intrinsic value of options

exercisable at September 30, 2023 (1)

(1) The Company used a stock price of $ 7.84 as of September 30, 2023 to derive intrinsic value.

(2) Adjusted for the effect of annual

stock dividends.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

1 unchanged sentence

Stock Compensation Plans (Continued)

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

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

Class A Shares

Weighted Average Exercise Price (2)

Average Exercise Price (2)

Class C Shares

Weighted Average Exercise Price (2)

Average Exercise Price (2)

Outstanding at January 1, 2022

Adjustment for the effect of stock dividends

Outstanding at June 30, 2022

As of June 30, 2022:

Outstanding at September 30, 2022

As of September 30, 2022:

Options exercisable

As of June 30, 2022:

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 $ 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.

As of September 30, 2022:

Available options for

Weighted average contractual term of options outstanding at September

Weighted average contractual term of options exercisable at September

Aggregated intrinsic value of

options outstanding at September 30, 2022 (1)

Aggregated intrinsic value of

options exercisable at September 30, 2022 (1)

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

(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 six month periods ended June 30, 2023 and 2022 was $ 387,561 and $ 521,527 , respectively.

the exercise date) of stock options exercised during the nine month periods ended September 30, 2023 and 2022 was $ 454,923 and $ 521,527 ,

respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Stock Units (“RSUs”)

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.

based compensation expense for RSUs issued of nil has been recognized under these plans for each of the three month periods ended September

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

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

As of September 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 six month period ended June 30, 2023 is summarized as follows:

of the RSUs during the nine month period ended September 30, 2023 is summarized as follows:

Schedule of Activity Restricted Stock Units

Class A Shares

Weighted Average Grant Date Fair Value

Average Grant Date Fair Value

Non-vested at January 1, 2023

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

Non-vested at September 30, 2023

Available RSUs for future

Aggregated intrinsic value of RSUs outstanding

at September 30, 2023 (1)

(1) The Company used a stock price of

$ 7.84 as of September 30, 2023 to derive intrinsic value.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

Schedule of Earnings Per Share, Basic and Diluted

Three Months Ended

Six Months Ended

Basic weighted-average shares outstanding

earnings (loss)

$ ( 2,353,185 )

weighted-average shares outstanding

Effect of dilutive securities:

Employee stock options

Diluted weighted-average shares outstanding

Basic net earnings per share

Diluted net earnings per share

the six month periods ended June 30, 2023, and 2022, there were 55,125 and 52,500 anti-dilutive employee stock option shares, respectively,

stock options

weighted-average shares outstanding

Basic net earnings (loss)

Diluted net earnings

(loss) per share

the nine month periods ended September 30, 2023, and 2022, there were 55,125 and 339,150 anti-dilutive 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.

6 unchanged sentences

Stock dividends

Conversion of Class C to Class A

Outstanding shares at June 30, 2022

of Class C to Class A

Outstanding shares at September 30, 2022

Outstanding shares at December 31, 2022

1 unchanged sentence

Exercise of stock options

Vesting of restricted stock units

Vesting of restricted stock

Stock dividends

Conversion of Class C to Class A

Outstanding shares at June 30, 2023

of Class C to Class A

Outstanding shares at September 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

30, 2023 (Unaudited)

Business Segment Information (Continued)

Schedule of Revenues and Expenses by Reportable Segment

Life Insurance

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Revenues from external customers

3 unchanged sentences

( 3,486,083 )

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Revenues from external customers

$ 140,685,555

$ 243,588,620

Intersegment revenues

11 unchanged sentences

$ 1,413,772,235

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Revenues from external customers

2 unchanged sentences

Segment profit (loss) before income taxes

For the Six Months Ended June 30, 2022

( 8,437,047 )

( 3,302,344 )

For the Nine Months Ended September 30, 2022

Revenues from external customers

1 unchanged sentence

$ 134,237,417

$ 281,469,781

Intersegment revenues

( 6,108,571 )

Segment profit before income taxes

Segment profit (loss) before income taxes

( 7,518,209 )

Identifiable Assets

23 unchanged sentences

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

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

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

of the asset or liability.

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

1 unchanged sentence

These inputs may reflect the Company’s estimates of the

assumptions that market participants would use in valuing the financial assets and financial liabilities.

assumptions that market participants would use in valuing financial assets and financial liabilities.

Company utilizes a combination of third-party valuation service providers, brokers, and internal valuation models to determine fair value.

29 unchanged sentences

Held for Sale :

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

The fair value is based on quoted market prices,

when available.

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

Fair value is often difficult to determine and may contain significant unobservable inputs.

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

The fair value is based on quoted market

prices, when available.

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

similar assets.

Fair value is often difficult to determine in volatile markets and may contain significant unobservable inputs.

Commitments and Forward Sale Commitments :

The Company’s mortgage segment enters into loan commitments with potential borrowers

The Company’s mortgage segment enters loan commitments with potential borrowers

and forward sale commitments to sell loans with third-party investors.

1 unchanged sentence

A loan commitment binds the Company to lend funds to a qualified borrower at a specified interest rate and within a specified period,

of time, generally up to 30 days after issuance of the loan commitment.

Loan commitments are defined to be derivatives under GAAP and

are recognized at fair value on the consolidated balance sheets with changes in their fair values recorded in current earnings.

generally up to 30 days after issuance of the loan commitment.

Loan commitments are defined to be derivatives under GAAP and are recognized

at fair value on the consolidated balance sheets with changes in their fair values recorded in current earnings.

Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted

6 unchanged sentences

Fallout rates and other factors from the Company’s recent historical data are

used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.

used to estimate the quantity and value of mortgage loans that will be funded within the terms of the commitments.

Mortgage Loans Held for Investment :

32 unchanged sentences

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

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

their classification in the condensed consolidated balance sheet as of September 30, 2023:

of Fair Value Assets and Liabilities Measured on a Recurring Basis

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

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

$ 356,448,259

7 unchanged sentences

Derivatives - loan commitments

Total assets accounted for at fair value on a

Total assets accounted

for at fair value on a

recurring basis

2 unchanged sentences

$ 158,596,456

Liabilities accounted for at fair value on a recurring basis

Liabilities accounted for at fair value

recurring basis

Derivatives - loan commitments

1 unchanged sentence

( 3,088,542 )

Total liabilities accounted for at fair value

Total liabilities

accounted for at fair value

on a recurring basis

1 unchanged sentence

$ ( 3,088,542 )

(1) Fixed maturity

securities available for sale

(1) Fixed maturity securities available

(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

(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

3 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 December 31, 2022:

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

Quoted Prices in Active Markets for Identical Assets

16 unchanged sentences

$ 146,704,995

Liabilities accounted for at fair value on a

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

17 unchanged sentences

Fair Value of Financial Instruments (Continued)

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

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

used in the fair value measurements were as follows:

of Assets and Liabilities Measured at Fair Value on Recurring Basis

Range of Inputs

Fair Value at

June 30, 2023

September 30, 2023

Loans held for sale

11 unchanged sentences

used in the fair value measurements were as follows:

Fair Value at

Range of Inputs

Fair Value at

December 31, 2022

Loans held for sale

14 unchanged sentences

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

six month periods ended June 30, 2023:

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

nine month period ended September 30, 2023:

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

Net Loan Commitments

12 unchanged sentences

( 977,716 )(1)

31,576,482 (1)

Included in other comprehensive income

Balance - June 30, 2023

Balance - September 30, 2023

$ 152,546,566

4 unchanged sentences

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

six month periods ended June 30, 2022:

nine month period ended September 30, 2022:

Net Loan Commitments

7 unchanged sentences

( 2,987,906,269 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

1 unchanged sentence

( 2,843,155 )(1)

59,190,794 (1)

Included in other comprehensive income

Balance - June 30, 2022

Balance - September 30, 2022

$ 161,981,923

8 unchanged sentences

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

three month periods ended June 30, 2023:

three month period ended September 30, 2023:

Net Loan Commitments

1 unchanged sentence

Fixed Maturity Securities Available for Sale

Balance - March 31, 2023

Balance - June 30, 2023

$ 161,310,060

9 unchanged sentences

Included in other comprehensive income

Balance - June 30, 2023

Balance - September 30, 2023

$ 152,546,566

4 unchanged sentences

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

three month periods ended June 30, 2022:

three month period ended September 30, 2022:

Net Loan Commitments

1 unchanged sentence

Fixed Maturity Securities Available for Sale

Balance - March 31, 2022

Balance - June 30, 2022

$ 209,860,409

Originations and purchases

1,010,742,878

Sales, maturities and paydowns

( 800,430,402 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

3 unchanged sentences

Included in other comprehensive income

Balance - June 30, 2022

Balance - September 30, 2022

$ 161,981,923

7 unchanged sentences

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.

Company did not have any financial assets and financial liabilities measured at fair value on a nonrecurring basis as of September 30,

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

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

by their classification in the condensed consolidated balance sheet as of December 31, 2022:

Schedule of Fair Value Assets Measured on a Nonrecurring Basis

5 unchanged sentences

Total assets accounted for at fair value on a nonrecurring basis

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Fair Value of Financial Instruments (Continued)

Value of Financial Instruments Carried at Other Than Fair Value

5 unchanged sentences

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

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

necessarily indicative of the amounts the Company could have realized in a sales transaction as of September 30, 2023 and December 31,

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

are summarized as follows as of June 30, 2023:

are summarized as follows as of September 30, 2023:

Schedule of Financial Instruments Carried at Other Than Fair Value

97 unchanged sentences

Policy benefits

and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances.

and claims that are charged to expense include benefit claims incurred in the period of more than related policy account balances.

crediting rates for interest-sensitive insurance products ranged from 1.5 % to 6.5 %.

13 unchanged sentences

The probability that a loan will not be funded, or the loan application is denied or withdrawn

within the terms of the commitment is driven by a number of factors, particularly the change, if any, in mortgage rates following the

issuance of the loan commitment.

within the terms of the commitment is driven by several factors, particularly the change, if any, in mortgage rates following the issuance

of the loan commitment.

general, the probability of funding increases if mortgage rates rise and decreases if mortgage rates fall.

5 unchanged sentences

approval status.

The Company has developed fallout estimates using historical data that take into account all of the variables, as well

as renegotiations of rate and point commitments that tend to occur when mortgage rates fall.

These fallout estimates are used to estimate

the number of loans that the Company expects to be funded within the terms of the loan commitments and are updated periodically to reflect

the most current data.

The Company has developed fallout estimates using historical data that consider all the variables, as well as renegotiations

of rate and point commitments that tend to occur when mortgage rates fall.

These fallout estimates are used to estimate the number of

loans that the Company expects to be funded within the terms of the loan commitments and are updated periodically to reflect the most

current data.

Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted

5 unchanged sentences

Fallout rates and other factors from the Company’s recent historical data are used to estimate the quantity and value of

mortgage loans that will fund within the terms of the commitments.

mortgage loans that will be funded within the terms of the commitments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

20 unchanged sentences

of Derivative Assets at Fair Value

June 30, 2023

September 30, 2023

December 31, 2022

21 unchanged sentences

Net Amount Gain (Loss)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Classification

3 unchanged sentences

$ ( 3,271,282 )

$ ( 977,716 )

$ ( 2,843,155 )

Call and put options

4 unchanged sentences

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 .

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

The Company evaluates the financial

condition of reinsurers and monitors the concentration of credit risk.

The Company has also assumed insurance from other companies.

Company follows the procedure of reinsuring risks of more than a specified limit, which ranges from $ 25,000 to $ 100,000 on newly issued

The Company has also assumed various reinsurance agreements through acquisition of various life companies.

The Company is ultimately

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

The Company evaluates

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

The Company is also a reinsurer of insurance with

other companies.

Loan Loss Settlements

6 unchanged sentences

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

The agreement

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 .

This agreement allows SecurityNational

Mortgage to borrow up to $ 100,000,000 for the sole purpose of funding mortgage loans (the “Wells Fargo Bank Warehouse Line of Credit”).

charges interest at the 1-Month Secured Overnight Financing Rate (“SOFR”) rate plus 2.1% and expired and was not renewed on October 31, 2023 and will not be renewed because

of the lender exiting the marketplace.

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.

This agreement with the

bank allows SecurityNational Mortgage to borrow up to $ 100,000,000 for the sole purpose of funding mortgage loans.

The agreement charges

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

The Company is required to comply with covenants for adjusted

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 four-quarter basis.

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

This agreement with the bank allows

SecurityNational Mortgage to borrow up to $ 75,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest

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.

This agreement with the bank allows SecurityNational

Mortgage to borrow up to $ 25,000,000 for the sole purpose of funding mortgage loans.

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 December 1, 2023 .

This agreement allows SecurityNational

Mortgage to borrow up to $ 100,000,000 for the sole purpose of funding mortgage loans (the “Texas Capital Bank Warehouse Line of

The agreement charges interest at the 1-Month SOFR rate plus 2.0% and matures on November 30, 2024 .

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.

changes in the fair value of mortgage servicing rights) of at least $ 1.00 on a rolling four-quarter basis.

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

This agreement allows SecurityNational

Mortgage to borrow up to $ 25,000,000 for the sole purpose of funding mortgage loans (the “U.S.

Bank Warehouse Line of Credit”

and, together with the Wells Fargo Bank Warehouse Line of Credit and the Texas Capital Bank Warehouse Line of Credit, the “Warehouse

Lines of Credit”).

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 December 1, 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.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

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.

agreements for the Warehouse Lines of Credit include cross default provisions where certain events of default under other of SecurityNational

Mortgage’s obligations constitute events of default under the Warehouse Lines of Credit.

As of September 30, 2023, the Company

was not in compliance with the net income covenant of the Warehouse Lines of Credit and has received or is in the process of receiving

waivers under the Warehouse Lines of Credit 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.

advances of approximately $ 10,200,000 on the warehouse line of credit that has not provided a covenant waiver, the Company has sufficient

cash and borrowing capacity on the warehouse lines of credit 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 of credit with other

Contingencies and Commitments

Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition

and development.

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.

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

The maximum loan

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

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

is generally fixed 5.25 % to 8.50 % per annum.

Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements.

As of September

30, 2023, the Company’s commitments were approximately $ 157,247,000 for these loans, of which $ 104,378,000 had been funded.

Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made.

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

The Company receives fees and interest for these loans and

the interest rate is generally fixed at 5.25 % to 8.50 % per annum.

Maturities range between six and eighteen months.

Company belongs to a captive insurance group for certain casualty insurance, worker compensation and liability programs.

Insurance reserves

are maintained relative to these programs.

The level of exposure from catastrophic events is limited by the purchase of stop-loss and

aggregate liability reinsurance coverage.

When estimating the insurance liabilities and related reserves, the captive insurance management

considers a number of factors, which include historical claims experience, demographic factors, severity factors and valuations provided

by independent third-party actuaries.

If actual claims or adverse development of loss reserves occurs and exceed these estimates, additional

reserves may be required.

The estimation process contains uncertainty since captive insurance management must use judgment to estimate

the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of

the balance sheet date.

Company belongs to a captive insurance group (“the captive group”) for certain casualty insurance, worker compensation and

general liability programs.

The captive group maintains insurance reserves relative to these programs.

The level of exposure from catastrophic

events is limited by the purchase of stop-loss and aggregate liability reinsurance coverage.

When estimating the insurance liabilities

and related reserves, the captive group considers several factors, which include historical claims experience, demographic factors, severity

factors and valuations provided by independent third-party actuaries.

If actual claims or adverse development of loss reserves occurs

and exceed these estimates, additional reserves may be required from the Company and its members.

The estimation process contains uncertainty

since captive insurance management must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and

unreported claims for incidents incurred but not reported as of the balance sheet date.

Company is a defendant in various other legal actions arising from the normal conduct of business.

9 unchanged sentences

Mortgage Servicing Rights

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

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

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

8 unchanged sentences

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

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

When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for

that stratum to its estimated recoverable value is charged to the valuation allowance.

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

If the Company deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs

for that stratum to its estimated recoverable value is charged to the valuation allowance.

following table presents the MSR activity:

of Mortgage Servicing Rights

As of June 30,

As of September 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

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

Balance at end of period

1 unchanged sentence

Estimated fair value of MSRs at end of period

(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

Included in mortgage fee income on the condensed consolidated

statements of earnings

Included in other expenses on the condensed consolidated statements

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

30, 2023 (Unaudited)

11) Mortgage Servicing

Rights (Continued)

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 June 30, 2023 valuation of MSRs.

The assumptions underlying the following

estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization

levels to change over time.

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

was developed using the Company’s assumptions in its September 30, 2023 valuation of MSRs.

The assumptions used in the following

table are likely to change as market conditions, portfolio composition and borrower behavior change, causing both actual and projected

amortization levels to change over time.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Contractual servicing fees

1 unchanged sentence

of Unpaid Principal Balances of the Servicing Portfolio

As of June 30,

As of September 30,

As of December 31, 2022

4 unchanged sentences

of Assumptions Used in Determining MSR Value

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Substantially

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

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

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

completed the physical transfer of files prior to its deadline.

The holdbacks have been received in 2023.

2 unchanged sentences

30, 2023 (Unaudited)

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,

Company’s overall effective tax rate for the three month periods ended September 30, 2023 and 2022 was 21.7 % and 28.7 %, respectively,

which resulted in a provision for income taxes of $ 1,117,397 and $ ( 949,159 ) , respectively, and for the nine month periods ended September

30, 2023 and 2022 was 21.9 % and 24.2 %, respectively, which resulted in a provision for income taxes of $ 3,258,740 and $ 1,421,036 , 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.

The Company’s effective tax rate is higher than the U.S.

federal statutory rate of 21 % due to, among other factors, state taxes

as offset by certain state income tax benefits, 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 was primarily due to a smaller increase in the valuation

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

25 unchanged sentences

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

Goods or services are deferred until such time

Goods or services are deferred until such a time

the service is performed or merchandise is received.

3 unchanged sentences

In such cases, the Company will act as an agent in transferring the requested goods and services.

A transfer of goods and services

does not fulfill an obligation and revenue remains deferred.

The transfer of goods and

services does not fulfill an obligation and revenue remains deferred.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

9 unchanged sentences

Opening (January 1, 2023)

Closing (June 30, 2023)

Closing (September 30, 2023)

Increase/(decrease)

6 unchanged sentences

Increase/(decrease)

(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.

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 September 30, 2023

and 2022 was $ 1,279,750 and $ 1,034,035 , respectively, and for the nine month periods ended September 30, 2023 and 2022 was $ 3,516,215

and $ 3,624,463 , 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

September 30,

Nine Months Ended

September 30,

Major goods/service lines

Net mortuary and cemetery

Net mortuary and cemetery sales

Timing of Revenue Recognition

10 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net mortuary and cemetery sales

Gains (losses) on investments and other assets

Losses on investments and other assets

( 1,615,253 )

Net investment income

3 unchanged sentences

Schedule of Receivables

As of June 30, 2023

As of September 30, 2023

As of December 31, 2022

12 unchanged sentences

Change in provision for credit losses (1)

( 651,308 )(1)

Ending balance - June 30, 2023

Ending balance - September 30, 2023

Beginning balance - January 1, 2022

1 unchanged sentence

Ending balance - December 31, 2022

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

Included in other expenses on the condensed consolidated statements

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

7 unchanged sentences

pursuant to GAAP.

Also, management has determined that the Company is the primary beneficiary of these trusts, as it absorbs both a majority

of the losses and returns associated with the trusts.

The Company has consolidated cemetery endowment care trust investments with a corresponding

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

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

The Company is the primary beneficiary of these trusts, as it absorbs both the losses and any expenses associated with

The Company has consolidated cemetery endowment care trust investments with a corresponding amount recorded as Cemetery Perpetual

Care Obligation in the accompanying consolidated balance sheets .

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

of Investments

4 unchanged sentences

Estimated Fair Value

June 30, 2023:

September 30, 2023:

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

50 unchanged sentences

Maturity Securities

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.

The tables set forth

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

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

of September 30, 2023 and December 31, 2022.

The unrealized losses were primarily related to interest rate fluctuations.

The tables set

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

of Fair Value of Fixed Maturity Securities

2 unchanged sentences

Total Unrealized Loss

At June 30, 2023

September 30, 2023

Treasury securities and obligations of U.S.

3 unchanged sentences

Total unrealized losses

At December 31, 2022

December 31, 2022

Treasury securities and obligations of U.S.

6 unchanged sentences

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

or prepay obligations with or without call or prepayment penalties.

holdings were comprised of four securities with fair values aggregating 96.0 % of the aggregate amortized cost as of September 30, 2023.

Relevant holdings were comprised of five securities with fair values aggregating 96.4 % of aggregate amortized cost as of December 31,

No credit losses have been recognized for the three and nine month periods ended September 30, 2023 and 2022, since the increase

in unrealized losses is primarily a result of the recent increases in interest and inflation rates.

See Note 3 for additional information

regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.

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

2023, by contractual maturity.

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

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

Schedule of Investments Classified by Contractual

16 unchanged sentences

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

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

assets as of September 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

June 30, 2023:

September 30, 2023:

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

16 unchanged sentences

Total restricted assets

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

Including cash and cash equivalents of $ 8,224,592 for the life

insurance and mortgage segments.

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

18 unchanged sentences

Total restricted assets

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

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

insurance and mortgage segments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Maturity Securities

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.

The tables set forth

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

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

of September 30, 2023 and December 31, 2022.

The unrealized losses were primarily related to interest rate fluctuations.

The tables set

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

of Fair Value of Fixed Maturity Securities

2 unchanged sentences

Total Unrealized Loss

At June 30, 2023

September 30, 2023

Treasury securities and obligations of U.S.

3 unchanged sentences

Total unrealized losses

At December 31, 2022

December 31, 2022

Obligations of states and political subdivisions

1 unchanged sentence

Total unrealized losses

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

or prepay obligations with or without call or prepayment penalties:

holdings were comprised of 16 securities with fair values aggregating 97.5 % of the aggregate amortized cost as of September 30, 2023.

Relevant holdings were comprised of 17 securities with fair values aggregating 98.2 % of the aggregate amortized cost as of December 31,

No credit losses have been recognized for the three and nine month periods ended September 30, 2023 and 2022, since the increase

in unrealized losses is primarily a result of the recent increase in interest and inflation rates.

See Note 3 for additional information

regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.

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

2023, by contractual maturity.

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

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

Schedule of Investments Classified by Contractual

10 unchanged sentences

Accumulated Other Comprehensive Income (loss)

following summarizes the changes in accumulated other comprehensive income (loss):

following table summarizes the changes in accumulated other comprehensive income (loss):

Schedule of Changes in Accumulated Other Comprehensive Income

Three Months Ended June 30,

Six Months Ended June 30,

Unrealized gains (losses) on fixed maturity securities

available for sale

Three Months Ended September 30,

Nine Months Ended September 30,

Unrealized losses on fixed maturity securities available for sale

$ ( 6,725,752 )

1 unchanged sentence

$ ( 6,310,923 )

Amounts reclassified into net earnings

Net unrealized gains (losses) before taxes

$ ( 42,014,068 )

Amounts reclassified into net earnings (loss)

Net unrealized losses before taxes

( 6,805,602 )

( 13,523,240 )

Tax (expense) benefit

( 6,580,750 )

1 unchanged sentence

( 5,376,426 )

Unrealized losses on restricted assets (1)

Unrealized losses on cemetery perpetual care

trust investments (1)

Other comprehensive income (loss) changes

( 10,683,359 )

1 unchanged sentence

( 33,057,765 )

Unrealized gains (losses) on restricted assets (1)

Tax benefit (expense)

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

Tax benefit (expense)

Other comprehensive loss changes

$ ( 5,387,527 )

$ ( 10,641,313 )

$ ( 5,212,021 )

$ ( 33,142,128 )

Fixed maturity securities available for sale

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

following table presents the accumulated balances of other comprehensive income (loss) as of September 30, 2023:

Schedule of Accumulated Balances of Other Comprehensive Income

1 unchanged sentence

Change for the period

Ending Balance

Unrealized gains (losses) on fixed maturity securities

available for sale

Ending Balance September 30,

Unrealized losses on fixed maturity securities available for sale

$ ( 13,050,767 )

$ ( 5,198,792 )

$ ( 18,249,559 )

Unrealized losses on restricted assets (1)

Unrealized losses on cemetery perpetual

care trust investments (1)

Other comprehensive income (loss)

Unrealized losses on cemetery perpetual care trust investments (1)

Other comprehensive loss

$ ( 13,070,277 )

$ ( 5,212,021 )

$ ( 18,282,298 )

Fixed maturity securities available for sale

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

following table presents the accumulated balances of other comprehensive income (loss) as of December 31, 2022:

Beginning Balance December 31, 2021

Change for the

Ending Balance

Unrealized gains (losses) on fixed maturity securities

available for sale

Change for the period

Ending Balance December 31,

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

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

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