What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-14 compared with 2023-11-14 · 938 added, 1233 removed, 1417 unchanged (61% of the section changed)

Financial Statements.

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)

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

March 31, 2024

December 31, 2023

Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $ 386,405,977 and $ 390,884,441 for 2024 and 2023, respectively;

net of allowance for credit losses of $ 410,549 and $ 314,549 for 2024 and 2023, respectively)

$ 375,833,407

$ 381,535,986

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)

Equity securities at estimated fair value (cost of $ 11,160,744 and $ 10,571,505 for 2024 and 2023, respectively)

Mortgage loans held for investment (net of allowance for credit losses of $ 2,921,614 and $ 3,818,653 for 2024 and 2023, respectively)

Real estate held for investment (net of accumulated depreciation of $ 27,161,160 and $ 29,307,791 for 2024 and 2023, respectively)

Real estate held for sale

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

Other investments and policy loans (net of allowance for credit losses of $ 1,587,525 and $ 1,553,836 for 2024 and 2023, respectively)

Accrued investment income

Total investments

1 unchanged sentence

Loans held for sale at estimated fair value

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)

Receivables (net of allowance for credit losses of $ 1,755,553 and $ 1,897,887 for 2024 and 2023, respectively)

Restricted assets (including $ 10,083,226 and $ 9,239,063 for 2024 and 2023 respectively, at estimated fair value)

Cemetery perpetual care trust investments (including $ 5,217,068 and $ 4,969,005 for 2024 and 2023, respectively, at estimated fair value)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition

Deferred policy and pre-need contract acquisition costs

Mortgage servicing rights, net

6 unchanged sentences

CONSOLIDATED BALANCE SHEETS (Continued)

Liabilities and Stockholders’

Future policy benefits and unpaid

March 31, 2024

December 31, 2023

Liabilities and Stockholders’ Equity

Future policy benefits and unpaid claims

$ 923,292,031

2 unchanged sentences

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract

Deferred pre-need cemetery and mortuary contract revenues

Cemetery perpetual care obligation

5 unchanged sentences

Stockholders’ Equity

Preferred Stock - non-voting - $ 1.00 par

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

5,000,000 shares authorized;

2 unchanged sentences

40,000,000 shares authorized;

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

20,048,581 shares issued and outstanding as of March 31, 2024 and 20,048,002 shares issued and outstanding as of December 31, 2023

non-voting common stock - $ 1.00 par value;

5,000,000 shares authorized;

none issued or outstanding

convertible common stock - $ 2.00

convertible common stock - $ 2.00 par value;

6,000,000 shares authorized;

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

2,971,680 shares issued and outstanding as of March 31, 2024 and 2,971,854 shares issued and outstanding as of December 31, 2023

Common stock value

Additional paid-in capital

Accumulated other comprehensive loss, net of

Accumulated other comprehensive loss, net of taxes

( 7,780,656 )

1 unchanged sentence

Retained earnings

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

Treasury stock at cost - 756,386 Class A shares and 35,717 Class C shares as of March 31, 2024;

and 806,311 Class A shares and 35,717 Class C shares as of December 31, 2023

( 5,336,081 )

( 5,661,737 )

Total stockholders’

Liabilities and Stockholders’ Equity

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

$ 1,446,502,296

3 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Months Ended September 30,

Three Months Ended March 31,

Mortgage fee income

$ 118,983,231

Insurance premiums and other considerations

1 unchanged sentence

Net mortuary and cemetery sales

Losses on investments and other assets

( 2,178,952 )

( 2,921,372 )

Gains on investments and other assets

Total revenues

3 unchanged sentences

Increase in future policy benefits

Amortization of deferred policy and pre-need

acquisition costs and value of business acquired

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

Selling, general and administrative expenses:

Rent and rent related

Depreciation on property

and equipment

Costs related to funding

mortgage loans

Depreciation on property and equipment

Costs related to funding mortgage loans

Interest expense

Cost of goods and services

sold-mortuaries and cemeteries

Cost of goods and services sold-mortuaries and cemeteries

Total benefits and expenses

Earnings (loss) before income

( 3,302,344 )

Income tax benefit (expense)

( 1,117,397 )

( 3,258,740 )

( 1,421,036 )

Net earnings (loss)

Earnings before income taxes

Income tax expense

( 2,144,789 )

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)

Net earnings per Class A Equivalent common share (1)

Net earnings per Class A Equivalent common share-assuming

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

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

(1) Net earnings per

5 unchanged sentences

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Months Ended September 30,

$ ( 2,353,185 )

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Other comprehensive income:

Unrealized losses on

fixed maturity securities

available for sale

$ ( 6,805,602 )

( 13,523,240 )

( 6,580,750 )

( 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 )

( 6,598,389 )

( 41,957,626 )

Other comprehensive

loss, net of income tax

( 5,387,527 )

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

$ ( 1,131,650 )

Unrealized gains (losses) on restricted assets (1)

Unrealized gains (losses) on cemetery perpetual care trust

investments (1)

Other comprehensive income (loss), before income tax

( 1,134,314 )

Income tax (expense) benefit

( 1,097,530 )

Other comprehensive income (loss), net of income tax

Comprehensive income

$ ( 1,346,234 )

$ ( 12,994,498 )

$ ( 28,692,146 )

Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Months Ended September 30, 2023

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Three Months Ended March 31, 2024

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2024

3 unchanged sentences

$ 312,895,219

Cumulative effect adjustment upon adoption

of new accounting standard (ASU 2016-13)

Other comprehensive income

Stock-based compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

( 1,204,357 )

Conversion Class C to

March 31, 2023

$ ( 8,942,719 )

$ 202,728,972

$ ( 4,950,357 )

$ 297,033,642

Other comprehensive loss

( 3,952,052 )

Stock-based compensation expense

Exercise of stock options

Vesting of restricted stock units

1 unchanged sentence

Purchase of treasury stock

( 1,514,049 )

( 1,387,059 )

Conversion Class C to Class A

Stock dividends

( 9,002,969 )

June 30, 2023

$ ( 12,894,771 )

$ 200,078,709

$ ( 5,841,350 )

$ 298,762,757

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

March 31, 2024

$ ( 7,780,656 )

2 unchanged sentences

$ 320,103,974

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)

Three Months Ended March 31, 2023

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

January 1, 2023

2 unchanged sentences

$ ( 4,366,651 )

Other comprehensive loss

$ 292,786,927

( 12,190,330 )

Stock-based compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

Conversion Class C to

March 31, 2022

$ 187,766,207

Balance, value

$ ( 13,070,277 )

$ 202,160,306

Other comprehensive loss

$ ( 4,366,651 )

$ 292,786,927

Adoption of ASU 2016-13

Other comprehensive income

Stock-based compensation expense

5 unchanged sentences

Conversion Class C to Class A

Stock dividends

( 8,067,485 )

June 30, 2022

$ ( 4,430,367 )

$ 183,273,171

$ ( 6,229,574 )

$ 280,485,055

$ ( 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

March 31, 2023

$ ( 8,942,719 )

2 unchanged sentences

$ 297,033,642

Balance, value

$ ( 8,942,719 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Months Ended September 30,

Cash flows from operating

cash provided by operating activities

Three Months Ended March 31,

Cash flows from operating activities:

Net cash provided by (used in) operating activities

$ ( 16,073,799 )

Cash flows from investing

Cash flows from investing activities:

Purchases of fixed maturity securities

1 unchanged sentence

( 11,911,847 )

Sales, calls and maturities of fixed maturity

Sales, calls and maturities of fixed maturity securities

Purchases of equity securities

3 unchanged sentences

Purchases of restricted assets

( 1,836,290 )

( 1,157,021 )

Sales, calls and maturities of restricted assets

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

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

( 166,160,908 )

( 165,651,041 )

Payments received for mortgage loans held for

investment, other investments and policy loans

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

Purchases of property and equipment

4 unchanged sentences

Sales of real estate

cash provided by (used in) investing activities

( 96,403,904 )

Cash flows from financing

Net cash provided by investing activities

Cash flows from financing activities:

Investment contract receipts

5 unchanged sentences

( 1,204,357 )

( 7,277,291 )

Repayment of bank loans

( 15,684,446 )

( 48,383,522 )

Proceeds from bank loans

Net change in warehouse

line borrowings for loans held for sale

Net change in warehouse line borrowings for loans held for sale

( 53,656,378 )

Net cash used in financing activities

( 2,149,221 )

cash used in financing activities

( 25,242,173 )

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

( 23,951,570 )

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

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

$ 164,550,756

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

$ 109,532,247

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 of loans held for sale to mortgage loans held for investment

Loans held for sale foreclosed into real estate held for sale

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

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

Transfer from mortgage loans held for investment to restricted assets

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

NATIONAL FINANCIAL CORPORATION

3 unchanged sentences

flows is presented in the table below:

Months Ended September 30,

Three Months Ended March 31,

Cash and cash equivalents

1 unchanged sentence

Restricted assets

Cemetery perpetual care

trust investments

Total cash, cash equivalents,

restricted cash and restricted cash equivalents

Cemetery perpetual care trust investments

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

$ 164,550,756

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

$ 109,532,247

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

$ 164,550,756

$ 109,532,247

accompanying notes to condensed consolidated financial statements (unaudited).

13 unchanged sentences

considered necessary for a fair presentation have been included.

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.

Operating results for the three month periods ended March 31, 2024 are

not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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

15 unchanged sentences

the value of mortgage servicing rights;

those used in determining allowances for credit losses;

those used in determining the value of loans held for sale;

those used in determining allowances

for credit losses;

those used in determining loan loss reserve;

and those used in determining deferred tax assets and liabilities.

Although some variability is inherent in these estimates, management

believes the amounts provided are fairly stated in all material respects.

Environment .

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

Corporation (FDIC).

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.

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

The Company may periodically transfer funds to these banks to pay for services rendered by third party vendors that continue to

maintain banking relationships with these banks.

The Company continues to monitor the banking industry and its relationships with regional

and community banks.

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

20 unchanged sentences

Residential construction

Restriced assets - mortgage loans held for

Cemetery perpetual care trust investments -

mortgage loans held for investment:

Restriced assets - mortgage loans held for investment:

Residential construction

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

Residential construction

Standards Issued But Not Yet Adopted

11 unchanged sentences

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 identification of cohorts, system updates, and design.

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.

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” — Issued in December 2023, ASU

2023-09 requires that public business entities, on an annual basis:

(i) disclose specific categories in the rate reconciliation and (ii)

provide additional information for reconciling items that meet a quantitative threshold.

In addition, the amendments in this update require

that all entities disclose on an annual basis the following information about income taxes paid:

(i) the amount of income taxes paid

(net of refunds received) disaggregated by federal (national), state, and foreign taxes and (ii) the amount of income taxes paid (net

of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater

than 5 percent of total income taxes paid (net of refunds received).

ASU 2023-09 is effective for the Company beginning on January 1,

The Company is in the process of estimating the impact of the new guidance on the consolidated financial statements.

“Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” — Issued in November

2023, ASU 2023-07 requires enhanced disclosures about significant segment expenses.

The key amendments include:

(i) disclosures on significant

segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of

segment profit or loss on an annual and interim basis;

(ii) disclosures on an amount for other segment items by reportable segment and

a description of its composition on an annual and interim basis.

The other segment items category is the difference between segment revenue

less the significant expenses disclosed and each reported measure of segment profit or loss;

(iii) providing all annual disclosures on

a reportable segment’s profit or loss and assets currently required by FASB ASC Topic 280, Segment Reporting in interim periods;

and (iv) specifying the title and position of the CODM.

ASU 2023-07 is effective for the Company for annual periods beginning January

1, 2024 and interim periods beginning January 1, 2025.

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

31, 2024 (Unaudited)

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

Company’s investments as of March 31, 2024 are summarized as follows:

of Investments

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.

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses (1)

Allowance for Credit Losses

Estimated Fair Value

March 31, 2024:

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

Treasury securities and obligations of U.S.

Government agencies

2 unchanged sentences

$ 107,126,454

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Obligations of states and political subdivisions

Corporate securities including public utilities

( 7,446,098 )

1 unchanged sentence

( 4,379,130 )

preferred stock

fixed maturity securities available for sale

Redeemable preferred stock

Total fixed maturity securities available for sale

$ 386,405,977

4 unchanged sentences

Common stock:

Industrial, miscellaneous

and all other

Industrial, miscellaneous and all other

$ ( 283,282 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 283,282 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

$ 106,764,632

Residential construction

Unamortized deferred

loan fees, net

Unamortized deferred loan fees, net

( 1,711,491 )

Allowance for credit

Allowance for credit losses

( 2,921,614 )

Net discounts

Total mortgage loans

held for investment

Total mortgage loans held for investment

$ 268,636,784

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

$ 183,562,322

Real estate held for sale:

Total real estate

held for sale

Other investments and policy loans at amortized

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank

Federal Home Loan Bank stock (2)

Other investments

1 unchanged sentence

( 1,587,525 )

Total other investments

and policy loans

Accrued investment

Total other investments and policy loans

Accrued investment income

Total investments

$ 935,789,485

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.

(1) Gross unrealized

losses are net of allowance for credit losses

(2) Includes $ 552,600

of Membership stock and $ 1,773,300 of Activity stock attributable to short-term borrowings and letters of credit.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Investments (Continued)

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

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses (1)

Allowance for Credit Losses

Estimated Fair Value

December 31, 2023:

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

Treasury securities and obligations of U.S.

Government agencies

$ 111,450,753

Obligations of states and

political subdivisions

Corporate securities including

public utilities

$ ( 1,416,448 )

$ 110,378,730

Obligations of states and political subdivisions

Corporate securities including public utilities

( 7,145,507 )

Mortgage-backed securities

( 4,702,905 )

preferred stock

fixed maturity securities available for sale

Redeemable preferred stock

Total fixed maturity securities available for sale

$ 390,884,441

1 unchanged sentence

$ ( 314,549 )

$ 381,535,986

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous

and all other

Industrial, miscellaneous and all other

$ ( 439,575 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 439,575 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

$ 103,153,587

Residential construction

Unamortized deferred

loan fees, net

Unamortized deferred loan fees, net

( 1,623,226 )

Allowance for credit

Allowance for credit losses

( 3,818,653 )

Net discounts

Total mortgage loans

held for investment

Total mortgage loans held for investment

$ 275,616,837

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

$ 183,419,292

Real estate held for sale:

Total real estate

held for sale

Other investments and policy loans at amortized

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank

Federal Home Loan Bank stock (2)

Other investments

1 unchanged sentence

( 1,553,836 )

Total other investments

and policy loans

Accrued investment

Total policy loans and other investments

Accrued investment income

Total investments

$ 936,812,566

Includes $ 938,500 of Membership stock and $ 1,661,800 of Activity

stock attributable to short-term borrowings and letters of credit.

(1) Gross unrealized

losses are net of allowance for credit losses

(2) Includes $ 530,900

of Membership stock and $ 1,748,900 of Activity stock due to short-term advances and letters of credit.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Investments (Continued)

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 March 31, 2024, other than investments issued or guaranteed by the United States

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 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 March 31, 2024 and December 31, 2023.

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

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

September 30, 2023

Treasury Securities And Obligations

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

Combined Fair Value

March 31, 2024

Treasury securities and obligations of U.S.

Government agencies

$ 106,083,141

Obligations of states and political subdivisions

Corporate securities

Mortgage and other asset-backed

$ 128,622,664

Mortgage-backed securities

$ 168,812,804

1 unchanged sentence

December 31, 2023

Treasury Securities And Obligations of

Treasury securities and obligations of U.S.

Government agencies

1 unchanged sentence

Corporate securities

Mortgage and other asset-backed

Mortgage-backed securities

$ 205,910,291

$ 250,584,924

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.

holdings were comprised of 634 securities with fair values aggregating 95.2 % of the aggregate amortized cost as of March 31, 2024.

holdings were comprised of 606 securities with fair values aggregating 94.9 % of the aggregate amortized cost as of December 31, 2023.

Credit loss provision of $ 96,000 and $ 179,500 have been recognized for the three month periods ended March 31, 2024 and 2023, respectively.

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

unrealized losses for which no credit loss was recognized are primarily the result of increases in interest rates.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Investments (Continued)

of Allowance for Credit Losses

22 unchanged sentences

on the condensed consolidated statements of earnings.

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.

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 account.

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.

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

7 unchanged sentences

31, 2024 (Unaudited)

Investments (Continued)

Quality Indicators

4 unchanged sentences

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

Based on the NAIC designations,

the Company had 98.2 % 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.

Based on the NAIC designations, the Company

had 98.1 % and 98.2 % of its fixed maturity securities rated investment grade as of March 31, 2024 and December 31, 2023, respectively.

The 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

March 31, 2024

December 31, 2023

NAIC Designation

Estimated Fair

$ 216,075,719

6 unchanged sentences

$ 381,275,986

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

following tables present 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

Months Ended September 30, 2023

Three Months Ended March 31, 2024

Treasury securities and obligations of U.S.

Government agencies

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

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Beginning balance - January 1, 2024

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 - March 31, 2024

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Investments (Continued)

Months Ended September 30, 2023

Three Months Ended March 31, 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”)

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

of Earnings on Fixed Maturity Securities

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)

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

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Beginning balance - January 1, 2023

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 - March 31, 2023

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

2024, 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

Estimated Fair

Due in 1 year

3 unchanged sentences

Mortgage-backed securities

Redeemable preferred

$ 380,283,562

Redeemable preferred stock

$ 386,405,977

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

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

$ 375,833,407

1 unchanged sentence

of Major Categories of Net Investment Income

Months Ended September 30,

Three Months Ended March 31,

Proceeds from sales

1 unchanged sentence

Gross realized losses

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

on Deposit, Held in Trust, and Pledged as Collateral

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

March 31, 2024

December 31, 2023

Fixed maturity securities available for sale

at estimated fair value

Other investments

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.

Total assets on deposit

held in trust related to third-party reinsurance agreements were as follows:

March 31, 2024

December 31, 2023

Fixed maturity securities available for sale

at estimated fair value

Cash and cash equivalents

Total assets on deposit

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

Assets pledged as collateral with the

FHLB are presented below.

These pledged securities are used as collateral for any FHLB cash advances.

December 31, 2023

Fixed maturity securities available for sale

at estimated fair value

Total assets pledged as collateral

Estate Held for Investment and Held for Sale

9 unchanged sentences

of the Board of Directors.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

Company employs full-time employees to attend to the day-to-day operations of those assets within the greater Salt Lake area and close

4 unchanged sentences

in employment and population and that provide operational efficiencies.

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

Company currently owns and operates seven commercial properties in two states.

These properties include office buildings, flex office

3 unchanged sentences

or asset class diversification.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

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

aggregated net book value of commercial real estate serving as collateral for bank loans was $ 123,079,008 and $ 124,381,467 as of March

31, 2024 and December 31, 2023, respectively.

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

The associated bank loan carrying values totaled $ 97,359,494 and $ 97,807,614 as of March

31, 2024 and December 31, 2023, respectively.

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

the three month periods ended March 31, 2024 and 2023, the Company did not record any impairment losses on commercial real estate held

for investment or held for sale.

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

consolidated statements of earnings.

the three month periods ended March 31, 2024 and 2023, the Company recorded depreciation expense on commercial real estate held for investment

of $ 1,527,793 and $ 1,565,927 , respectively.

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

estimated useful life, primarily using the straight-line method.

Depreciation is included in net investment income on the consolidated

statements of earnings.

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

of Commercial Real Estate Investment

Square Footage

Net Book Value

Total Square Footage

March 31, 2024

December 31, 2023

March 31, 2024

December 31, 2023

$ 128,904,262

3 unchanged sentences

Includes Center53

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

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

Square Footage

Net Book Value

Total Square Footage

December 31, 2023

Mississippi (1)

(1) Consists of approximately

acres of undeveloped land

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

93 acres of undeveloped land for $ 151,553 for 2024 and 2023.

The remaining property for $ 2,877,420 was sold in February 2024 for a gain

of approximately $ 250,000 .

(2) Sold in April 2024

for a gain of approximately $ 3,000

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

Real Estate Held for Investment and Held for Sale

8 unchanged sentences

residential property portfolio.

the three month periods ended March 31, 2024 and 2023 the Company did no t record any impairment losses on residential real estate held

for sale or held for investment.

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

consolidated statements of earnings.

the three month periods ended March 31, 2024 and 2023, the Company recorded depreciation expense on residential real estate held for

investment of $ 2,653 and $ 2,648 , respectively.

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

the estimated useful life, primarily using the straight-line method.

Depreciation is included in net investment income on the consolidated

statements of earnings.

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

of Residential Real Estate Investment

Net Book Value

March 31, 2024

December 31, 2023

(1) Includes multiple

residential subdivision development projects

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Investments (Continued)

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.

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

of Residential Real Estate Investment

Includes residential subdivision development

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

March 31, 2024

December 31, 2023

Lots developed

1 unchanged sentence

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

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

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

Net Book Value

March 31, 2024

December 31, 2023

net book value of foreclosed residential real estate included in residential real estate held for sale was $ 859,599 and nil as of March

31, 2024 and December 31, 2023, respectively.

Estate Owned and Occupied by the Company

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

As of September 30, 2023, real estate

owned and occupied by the Company is summarized as follows:

As of March 31, 2024, real estate owned

and occupied by the Company is summarized as follows:

of Real Estate Owned and Occupied by the Company

Business Segment

Square Footage

Footage Occupied by the Company

433 Ascension Way, Floors 4, 5

and 6, Salt Lake City, UT - Center53 Building 2 (1)

Corporate Offices, Life Insurance,

Cemetery/Mortuary Operations, and Mortgage Operations and Sales

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

Life Insurance Operations

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

1818 Marshall Street, Shreveport, LA (2)

4 unchanged sentences

Life Insurance Sales

1550 N 3rd Street, Jena, LA (2)

Life Insurance Sales

Included in real estate held for investment on the condensed

consolidated balance sheets

(1) Included in real estate held for investment on the condensed consolidated balance sheets

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

(3) Sold in April 2024 for a loss of approximately $ 39,000

(4) Listed for sale

Loans Held for Investment

2 unchanged sentences

maturity dates range from nine months to 30 years and the loans are secured by real estate.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

Concentrations

5 unchanged sentences

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

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.

As of March 31, 2024, the Company had 43 %, 11 %, 8 %, 8 % and

7 %, of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, and Arizona, respectively.

December 31, 2023, the Company had 44 %, 11 %, 10 %, 7 % and 6 % of its mortgage loans from borrowers located in the states of Utah, Florida,

California, Texas, and Arizona respectively.

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

11 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

of Allowance for Credit Losses

16 unchanged sentences

Interest not accrued

on these loans totaled approximately $ 249,000 and $ 226,000 as of September 30, 2023, and December 31, 2022, respectively.

on these loans totaled approximately $ 328,000 and $ 237,000 as of March 31, 2024 and December 31, 2023, respectively.

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

11 unchanged sentences

guarantor’s) ability to repay.

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

The Company uses a combination

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

The Company applies

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

loans are evaluated for credit loss by analyzing common metrics that are predictors for future credit losses such as debt service coverage

ratio (“DSCR”), loan to value (“LTV”), local market conditions, borrower quality, and underlying collateral.

The fair value of the underlying collateral is based on a third-party appraisal of the property at origination of the loan.

value is assessed if the loan becomes 90 days delinquent.

The Company uses these metrics to pool similar loans.

The allowance for credit

losses is based on estimates, historical experience, probability of loss, value of the underlying collateral, and other factors that

affect the collectability of the loan.

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

the allowance for credit losses.

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

3 unchanged sentences

guaranteed by private mortgage insurance, the FHA, or VA.

Company uses a third-party to provide a monthly analysis of its residential portfolio for credit losses.

The third party uses the Company’s

current loan data and runs it through various models to project cash flows and provide a projected life of loan loss.

The models consider

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

The Company also considers historical

delinquency rates and current unemployment trends.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

loans are evaluated for credit loss by using relevant available information from both internal and external sources.

Among other things,

the Company uses its historical delinquency information and considers current and forecasted economic conditions.

External sources include

a monthly analysis of its residential portfolio by a third party.

The third party uses the Company’s current loan data and runs

it through various models to project cash flows and provide a projected life of loan loss.

The models consider loan features such as

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

Analyzing the information from the various sources allows

the Company to arrive at the allowance for credit losses.

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

9 unchanged sentences

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

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

market trends.

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

construction mortgage loans are evaluated for credit loss by considering historical activity and current housing market trends to arrive

at a per loan basis point allowance that is recognized at loan origination and for subsequent draws.

The per loan basis point is reviewed

at least annually or as loan losses or market trends require.

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

of Allowance for Loan Losses

September 30, 2023

Allowance for credit losses:

Three Months Ended

Residential Construction

Beginning balance - January 1, 2024

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

Allowance for credit losses:

Change in provision for credit losses

Ending balance - March 31, 2024

Beginning balance - January 1, 2023

Change in provision for

credit losses (2)

Ending balance - December 31, 2022

See Note 2 of the notes to the condensed consolidated

financial statements

Included in other expenses on the condensed consolidated statements of earnings

Adoption of ASU 2016-13 (1)

Change in provision for credit losses (2)

Ending balance - March 31, 2023

(1) See Note 2 of the

notes to the condensed consolidated financial statements

(2) Included in other

expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

4 unchanged sentences

of Aging of Mortgage Loans

September 30, 2023

March 31, 2024

30-59 days past due

60-89 days past due

Over 90 days past due (1)

process of foreclosure (1)

mortgage loans

In process of foreclosure (1)

Total past due

Total mortgage loans

Allowance for credit losses

1 unchanged sentence

( 2,921,614 )

Unamortized deferred loan

Unamortized deferred loan fees, net

( 1,168,387 )

( 1,711,491 )

discounts, net

mortgage loans held for investment

Unamortized discounts, net

Net mortgage loans held for investment

$ 103,574,493

4 unchanged sentences

Over 90 days past due (1)

process of foreclosure (1)

mortgage loans

In process of foreclosure (1)

Total past due

Total mortgage loans

Allowance for credit losses

1 unchanged sentence

( 2,390,894 )

Unamortized deferred loan

( 3,818,653 )

Unamortized deferred loan fees, net

( 1,135,491 )

discounts, net

mortgage loans held for investment

( 1,623,226 )

Unamortized discounts, net

Net mortgage loans held for investment

$ 103,529,896

Interest income is not recognized on loans which are more than 90 days past

due or in foreclosure.

$ 275,616,837

(1) 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

September 30, 2023:

March 31, 2024:

of Commercial Mortgage Loans By Credit Quality Indicator

Quality Indicator

Credit Quality Indicator LTV:

Less than 65%

1 unchanged sentence

1.00x - 1.20x

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

December 31, 2023:

Quality Indicator LTV:

Less than 65%

Greater than 80%

1.00x - 1.20x

9,174,841 (1) (1)

Commercial construction loan

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

The Company defines

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

Monitoring a residential mortgage loan

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

(1) Commercial construction

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

Investments (Continued)

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

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

Monitoring a residential mortgage

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

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

September 30, 2023:

Quality Indicator

March 31, 2024:

Credit Quality Indicator

Performance Indicators:

$ 102,067,810

Non-performing (1)

Includes residential mortgage loans in the process of foreclosure

of $ 276,580 as of September 30, 2023

$ 106,764,632

(1) Includes residential

mortgage loans in the process of foreclosure of $ 1,694,997

Less than 65%

Greater than 80%

$ 106,764,632

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

December 31, 2023:

Credit Quality Indicator

Performance Indicators:

Non-performing (1)

$ 103,153,587

(1) Includes residential

mortgage loans in the process of foreclosure of $ 1,021,790

Less than 65%

Greater than 80%

$ 103,153,587

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 September 30, 2023:

follows as of March 31, 2024:

Schedule of Residential Construction Mortgage Loans

Quality Indicator

Credit Quality Indicator

Performance Indicators:

Non-performing

Less than 65%

Greater than 80%

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

follows as of December 31, 2023:

Credit Quality Indicator

Performance Indicators:

$ 104,052,748

4 unchanged sentences

$ 104,052,748

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

Investments (Continued)

following table presents the aging of insurance assignments, included in other investments and policy loans on the condensed consolidated

1 unchanged sentence

of Aging of Insurance Assignments

of September 30,

of December 31,

March 31, 2024

December 31, 2023

30-59 days past due

3 unchanged sentences

Total insurance assignments

Allowance for credit

Allowance for credit losses

( 1,587,525 )

5 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Investments (Continued)

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

Three Months Ended

Beginning balance - January 1, 2024

Change in provision for

credit losses ( 1 )

Ending balance - September 30, 2023

Change in provision for credit losses (1)

Ending balance - March 31, 2024

Beginning balance - January 1, 2023

Change in provision for

credit losses ( 1 )

Ending balance - December 31, 2022

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

Change in provision for credit losses (1)

Ending balance - March 31, 2023

(1) Included in other

expenses on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

31, 2024 (Unaudited)

Investments (Continued)

Related Earnings

2 unchanged sentences

of Gain (Loss) on Investments

Months Ended September 30,

Three Months Ended March 31,

Fixed maturity securities:

Gross realized

Gross realized gains

Gross realized losses

1 unchanged sentence

Equity securities:

Gains (losses) on securities

Unrealized losses on securities

held at the end of the period

( 1,321,511 )

( 1,383,627 )

( 4,097,049 )

Losses on securities sold

Unrealized gains on securities held at the end of the period

Real estate held for investment and sale:

1 unchanged sentence

Gross realized losses

Other assets, including call and put option

Other assets:

Gross realized gains

realized losses

$ ( 932,414 )

$ ( 2,178,952 )

$ ( 2,921,372 )

Gross realized losses

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 $ 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.

and mortuaries of $ 582,172 in net gains and $ 53,931 in net gains for the three month periods ended March 31, 2024 and 2023, respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

categories of net investment income were as follows:

Months Ended September 30,

Fixed maturity securities available

Three Months Ended March 31,

Fixed maturity securities available for sale

Equity securities

8 unchanged sentences

( 4,116,170 )

( 12,380,505 )

( 13,388,020 )

Net investment income

investment income includes income earned by the restricted assets of the cemeteries and mortuaries of $ 933,551 and $ 633,527 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.

month periods ended March 31, 2024 and 2023, respectively.

investment income on real estate consists primarily of rental revenue.

4 unchanged sentences

of Accrued Investment Income

of September 30,

of December 31,

Fixed maturity securities available

Fixed maturity securities available for sale

Equity securities

2 unchanged sentences

Cash and cash equivalents

Total accrued investment

Total accrued investment income

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

7 unchanged sentences

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.

Included in loans held for sale are loans in the process of foreclosure with an aggregate unpaid principal balance of $ 311,117

and $ 1,636,090 as of March 31, 2024 and December 31, 2023, respectively.

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

of September 30,

of December 31,

March 31, 2024

December 31, 2023

Aggregate fair value

7 unchanged sentences

of Mortgage Fee Income for Loans Held for Sale

Months Ended September 30,

Three Months Ended March 31,

Interest income

1 unchanged sentence

Change in fair value of loan commitments

( 1,504,286 )

( 3,271,282 )

( 2,843,155 )

Change in fair value of loans held for sale

( 4,131,363 )

( 7,973,171 )

Provision (release)

for loan loss reserve

Provision 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

10 unchanged sentences

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

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Loans Held for Sale (Continued)

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

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

of September 30,

of December 31,

of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses

As of March 31, 2024

As of December 31, 2023

Balance, beginning of period

Provision on current loan originations (1)

Charge-offs, net of

recaptured amounts

( 1,804,134 )

Charge-offs, net of recaptured amounts

( 1,205,598 )

Balance, end of period

(1) Included in mortgage fee income

(1) Included in mortgage

Company maintains reserves for estimated losses on current production volumes.

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

For the three month period ended March 31, 2024, $ 163,476

in reserves were added at a rate of 3.5 basis points per loan, the equivalent of $ 350 per $ 1,000,000 in loans originated.

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.

This is a decrease

over the three month period ended March 31, 2023, when reserves of $ 239,801 were added at a rate of 4.5 basis points per loan originated,

the equivalent of $ 450 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

4 unchanged sentences

based compensation expense for stock options issued of $ 198,998 and $ 142,929 has been recognized for these plans for the three month

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.

periods ended March 31, 2024 and 2023, respectively, and is included in personnel expenses on the condensed consolidated statements of

As of March 31, 2024, the total unrecognized compensation expense related to the options issued was $ 512,854 , 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 nine month period ended September 30, 2023, is summarized as follows:

of the stock option plans during the three month period ended March 31, 2024, is summarized as follows:

Schedule of Activity of Stock Option Plans

Class A Shares

Average Exercise Price (2)

Weighted Average Exercise Price (2)

Class C Shares

Average Exercise Price (2)

Weighted Average Exercise Price (2)

Outstanding at January 1, 2024

Adjustment for the effect of stock dividends

Outstanding at September 30, 2023

As of September 30, 2023:

Outstanding at March 31, 2024

As of March 31, 2024:

Options exercisable

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.

As of March 31, 2024:

Available options for future grant

Weighted average contractual term of options outstanding at March 31, 2024

Weighted average contractual term of options exercisable at March 31, 2024

Aggregated intrinsic value of options outstanding at March 31, 2024 (1)

Aggregated intrinsic value of options exercisable at March 31, 2024 (1)

(1) The Company used

a stock price of $ 7.91 as of March 31, 2024 to derive intrinsic value.

(2) Adjusted for the

effect of annual stock dividends.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Stock Compensation Plans (Continued)

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

Stock Compensation Plans

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

Class A Shares

Average Exercise Price (2)

Weighted Average Exercise Price (2)

Class C Shares

Average Exercise Price (2)

Weighted Average Exercise Price

Outstanding at January 1, 2023

Adjustment for the effect of stock dividends

Outstanding at September 30, 2022

As of September 30, 2022:

Outstanding at March 31, 2023

As of March 31, 2023:

Options exercisable

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.

As of March 31, 2023:

Available options for future grant

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

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

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

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

(1) The Company used

a stock price of $ 6.23 as of March 31, 2023 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 nine month periods ended September 30, 2023 and 2022 was $ 454,923 and $ 521,527 ,

respectively.

the exercise date) of stock options exercised during the three month periods ended March 31, 2024 and 2023 was nil and $ 176,935 , respectively.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Stock Compensation Plans (Continued)

Stock Compensation Plans

Stock Units (“RSUs”)

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 nine month period ended September 30, 2023 is summarized as follows:

based compensation expense for RSUs issued of $ 889 and $ 742 has been recognized under these plans for each of the three month periods

ended March 31, 2024 and 2023, respectively, and is included in personnel expenses on the condensed consolidated statements of earnings.

As of March 31, 2024, the total unrecognized compensation expense related to the RSUs issued was $ 2,375 , which is expected to be recognized

over the remaining vesting period.

of the RSUs during the three month period ended March 31, 2024 is summarized as follows:

Schedule of Activity Restricted Stock Units

Class A Shares

Average Grant Date Fair Value

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2024

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.

Non-vested at March 31, 2024

Available RSUs for future grant

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

Class A Shares

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at March 31, 2023

Available RSUs for future grant

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

Schedule of Earnings Per Share, Basic and Diluted

earnings (loss)

$ ( 2,353,185 )

weighted-average shares outstanding

Three Months Ended

Basic weighted-average shares outstanding

Effect of dilutive securities:

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,

Employee stock options

Diluted weighted-average shares outstanding

Basic net earnings per share

Diluted net earnings per share

the three month periods ended March 31, 2024 and 2023, there were 467,125 and 730,270 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.

3 unchanged sentences

Outstanding shares at December 31, 2022

Stock dividends

Exercise of stock options

Vesting of restricted stock units

Stock dividends

of Class C to Class A

Outstanding shares at September 30, 2022

Conversion of Class C to Class A

Outstanding shares at March 31, 2023

Outstanding shares at December 31, 2023

Common stock, shares, outstanding, beginning

Common stock, outstanding shares, beginning

Exercise of stock options

Vesting of restricted stock

Stock dividends

of Class C to Class A

Outstanding shares at September 30, 2023

Common stock, shares, outstanding, ending

Vesting of restricted stock units

Conversion of Class C to Class A

Outstanding shares at March 31, 2024

Common stock, outstanding shares, ending

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

24 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

For the Three Months Ended September 30, 2023

Revenues from external customers

Intersegment revenues

( 2,549,630 )

Segment profit (loss) before income taxes

( 3,486,083 )

For the Nine Months Ended September 30, 2023

Life Insurance

For the Three Months Ended

March 31, 2024

Revenues from external customers

$ 140,685,555

$ 243,588,620

Intersegment revenues

10 unchanged sentences

$ 1,446,502,296

$ 1,413,772,235

For the Three Months Ended September 30, 2022

Revenues from external customers

Intersegment revenues

( 1,916,530 )

Segment profit (loss) before income taxes

( 8,437,047 )

( 3,302,344 )

For the Nine Months Ended September 30, 2022

For the Three Months Ended

March 31, 2023

Revenues from external customers

$ 125,786,154

$ 134,237,417

$ 281,469,781

Intersegment revenues

22 unchanged sentences

value measurements are classified under the following hierarchy:

Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities

in an active market that the Company can access.

Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or

liabilities in an active market that the Company can access.

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

prices for similar assets or liabilities in active markets.

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

Quoted prices for similar assets or liabilities in active markets.

Quoted 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.

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

both unobservable and significant to the overall fair value measurement.

These inputs may reflect the Company’s estimates of the

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

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

are both unobservable and significant to the overall fair value measurement.

These inputs may reflect the Company’s estimates

of the 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.

7 unchanged sentences

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

A portion of these assets include mutual funds and equity securities and fixed maturity securities that have quoted market

prices that are used to determine fair value.

A portion of these assets include equity securities and fixed maturity securities that have quoted market prices that

are used to determine fair value.

Also included are cash and cash equivalents and participations in mortgage loans.

amounts reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values

due to their short-term nature.

The carrying amounts

reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values due

to their short-term nature.

Perpetual Care Trust Investments :

5 unchanged sentences

short-term nature.

and Put Option Derivatives :

The fair values for call and put options are based on quoted market prices.

Additionally,

1 unchanged sentence

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

1 unchanged sentence

Held for Sale :

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.

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 in volatile markets and may contain significant unobservable inputs.

46 unchanged sentences

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

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

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

of Fair Value Assets and Liabilities Measured on a Recurring Basis

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

their classification in the condensed consolidated balance sheet as of March 31, 2024:

Schedule 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

$ 375,833,407

7 unchanged sentences

Derivatives - loan commitments (3)

Total assets accounted

for at fair value on a

recurring basis

Total assets accounted for at fair value on a recurring basis

$ 524,428,953

1 unchanged sentence

$ 119,365,440

Liabilities accounted for at fair value

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - loan commitments (4)

2 unchanged sentences

Total liabilities

accounted for at fair value

on a recurring basis

accounted for at fair value on a recurring basis

$ ( 3,309,255 )

(1) Fixed maturity securities available

(1) Fixed maturity

securities available for sale

(2) Equity securities

(3) Included in other assets on the

consolidated balance sheets

(4) Included in other liabilities and

accrued expenses on the consolidated balance sheets

(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

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

20 unchanged sentences

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

Derivatives - put options (4)

Derivatives - loan commitments (4)

12 unchanged sentences

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

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

Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2024, the significant unobservable inputs

used in the fair value measurements were as follows:

of Assets and Liabilities Measured at Fair Value on Recurring Basis

of Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

Range of Inputs

Fair Value at

September 30, 2023

March 31, 2024

Loans held for sale

26 unchanged sentences

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

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

nine month period ended September 30, 2023:

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

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

three month period ended March 31, 2024:

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

Loan Commitments

Held for Sale

Maturity Securities Available for Sale

Balance - December 31, 2023

1 unchanged sentence

Originations and purchases

1,708,831,185

Sales, maturities and paydowns

2 unchanged sentences

( 1,867,552 )

Foreclosed into real estate held for sale

Total gains (losses):

Included in earnings

( 977,716 )(1)

31,576,482 (1)

Included in other comprehensive income

Balance - September 30, 2023

Included in other comprehensive

Balance - March 31, 2024

$ 112,678,958

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

nine month period ended September 30, 2022:

three month period ended March 31, 2023:

Net Loan Commitments

4 unchanged sentences

Originations and purchases

2,837,349,328

Sales, maturities and paydowns

( 511,909,942 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

1 unchanged sentence

11,877,930 (1)

59,190,794 (1)

Included in other comprehensive income

Balance - September 30, 2022

$ 161,981,923

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Fair Value of Financial Instruments (Continued)

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

three month period ended September 30, 2023:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - June 30, 2023

$ 161,310,060

Originations and purchases

Sales, maturities and paydowns

( 585,545,472 )

Transfer to mortgage loans held for investment

( 1,867,552 )

Total gains (losses):

Included in earnings

( 1,504,286 )(1)

9,553,586 (1)

Included in other comprehensive income

Balance - September 30, 2023

$ 152,546,566

(1) As a component

of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component

of Net investment income on the condensed consolidated statements of earnings

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

three month period ended September 30, 2022:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Balance - June 30, 2022

$ 209,860,409

Originations and purchases

Sales, maturities and paydowns

( 800,430,402 )

Transfer to mortgage loans held for investment

( 49,428,757 )

Total gains (losses):

Included in earnings

( 3,271,282 )(1)

14,590,805 (1)

Included in other comprehensive income

Balance - September 30, 2022

Balance - March 31, 2023

$ 173,015,404

3 unchanged sentences

of Net investment income on the condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Fair Value of Financial Instruments (Continued)

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 as of December 31, 2022:

Schedule of Fair Value Assets Measured on a Nonrecurring Basis

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a nonrecurring basis

Impaired mortgage loans held for investment

Total assets accounted for at fair value on a nonrecurring basis

Company did not have any financial assets and financial liabilities measured at fair value on a nonrecurring basis as of March 31, 2024

and as of December 31, 2023.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

2 unchanged sentences

balance sheet, for which it is practicable to estimate that value.

uses its best judgment in estimating the fair value of the Company’s financial instruments;

however, there are inherent limitations

in any estimation technique.

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 as of September 30, 2023 and December 31,

Company uses its best judgment in estimating the fair value of the Company’s financial instruments;

however, there are inherent

limitations in any estimation technique.

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 as of March 31, 2024 and December

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 September 30, 2023:

are summarized as follows as of March 31, 2024:

Schedule of Financial Instruments Carried at Other Than Fair Value

2 unchanged sentences

Mortgage loans held for investment

$ 103,574,492

$ 100,743,889

Residential construction

26 unchanged sentences

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

57 unchanged sentences

and Other Loans Payable :

The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial

instruments approximate their fair values due to their relatively short-term maturities and variable interest rates.

The carrying amounts reported in the accompanying condensed consolidated balance sheet for warehouse

lines of credit approximate their fair values due to their relatively short-term maturities and variable interest rates.

The estimated

fair value for bank loans collateralized by real estate is determined by estimating future cash flows of payments and discounting them

using current market rates.

Account Balances and Future Policy Benefits-Annuities :

43 unchanged sentences

31, 2024 (Unaudited)

Derivative Instruments (Continued)

Instruments (Continued)

Sale Commitments

7 unchanged sentences

expenses on the condensed consolidated balance sheets.

and Put Options Derivatives

Company discontinued its use of selling “out of the money” call options on its equity securities and the use of selling put

options as a source of revenue in the first quarter of 2023.

The net changes in the fair value of call and put options are shown in current

earnings as a component of realized gains (losses) on investments and other assets.

Call and put options are shown in other liabilities

and accrued expenses on the condensed consolidated balance sheets.

following table shows the fair value and notional amounts of derivative instruments:

of Derivative Assets at Fair Value

September 30, 2023

December 31, 2022

Balance Sheet Location

Notional Amount

Asset Fair Value

Liability Fair Value

Notional Amount

Asset Fair Value

Liability Fair Value

Derivatives not designated as hedging instruments:

Loan commitments

Other assets and Other liabilities

Schedule of Derivative Assets at Fair Value

Sheet Location

not designated as hedging instruments:

assets and Other liabilities

$ 229,458,247

$ 161,832,250

Other liabilities

$ 229,458,247

4 unchanged sentences

Schedule of Gains and Losses on Derivatives

Net Amount Gain (Loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Months Ended March 31,

Classification

Loan commitments

Mortgage fee income

$ ( 1,504,286 )

$ ( 3,271,282 )

$ ( 977,716 )

$ ( 2,843,155 )

Call and put options

Gains on investments and other assets

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

17 unchanged sentences

Covenants for Mortgage Warehouse Lines of Credit

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

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.

9 unchanged sentences

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.

and, together with 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 May 26, 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.

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 March 31, 2024, the Company was

not in compliance with the net income covenant of the warehouse lines of credit and its operating cash flow covenant for its standby

letter of credit with its primary bank.

SecurityNational Mortgage 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

$ 6,963,000 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 lenders.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Reinsurance, Commitments and Contingencies (Continued)

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 $ 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

Commitments and Contingencies (Continued)

Covenants for Revolving Lines of Credit and Bank Loans

Company has debt covenants on its revolving lines of credit and is required to comply with minimum operating cash flow ratios and minimum

net worth for each of its business segments.

The Company also has debt covenants for one of its loans on real estate for a minimum consolidated

operating cash flow ratio, minimum liquidity, and consolidated net worth.

In addition to these financial debt covenants, the company

is required to provide segment specific financial statements and building specific financial statements on all bank loans.

31, 2024, the Company was in compliance with all these debt covenants.

Contingencies and Commitments

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

As of September

31, 2024, the Company’s commitments were approximately $ 146,572,000 for these loans, of which $ 100,056,000 had been funded.

18 unchanged sentences

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

Management believes that none of the

actions, if adversely determined, will have a material effect on the Company’s financial position or results of operations.

on management’s assessment and legal counsel’s representations concerning the likelihood of unfavorable outcomes, no amounts

The Company believes that none of

the actions, if adversely determined, will have a material effect on the Company’s financial position or results of operations.

Based on the Company’s assessment and legal counsel’s analysis concerning the likelihood of unfavorable outcomes, no amounts

have been accrued for the above claims in the consolidated financial statements.

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

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

The Company is not a party to any other material legal

proceedings outside the ordinary course of business or to any other legal proceedings, which, if adversely determined, would have a material

adverse effect on its financial condition or results of operations.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

18 unchanged sentences

of Mortgage Servicing Rights

As of September 30,

As of December 31,

Amortized cost:

Balance before valuation allowance at beginning of year

MSR additions resulting from loan sales (1)

Amortization (2)

( 9,078,706 )

( 51,185,906 )

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

Balance before valuation allowance at end of period

Valuation allowance for impairment of MSRs:

Balance at beginning of year

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

Balance at end of period

Mortgage servicing rights, net

Estimated fair value of MSRs at end of period

Included in mortgage fee income on the condensed consolidated

statements of earnings

Included in other expenses on the condensed consolidated statements

before valuation allowance at beginning of year

additions resulting from loan sales ( 1 )

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

before valuation allowance at end of period

allowance for impairment of MSRs:

at beginning of year

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

at end of period

servicing rights, net

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

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

Mortgage Servicing Rights (Continued)

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 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.

was developed using the Company’s assumptions in its March 31, 2024 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

Estimated MSR Amortization

MSR Amortization

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

1 unchanged sentence

of Other Revenues

Three Months Ended

September 30,

Nine Months Ended

September 30,

Contractual servicing fees

servicing fees

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

of Unpaid Principal Balances of the Servicing Portfolio

As of September 30,

As of December 31, 2022

Servicing UPB

of December 31, 2023

$ 405,409,197

2 unchanged sentences

of Assumptions Used in Determining MSR Value

September 30, 2023

December 31, 2022

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

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

unpaid principal amount of approximately $ 7.02 billion.

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

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

Substantially

all 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.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

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 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

12) Income Taxes

Company’s overall effective tax rate for the three month periods ended March 31, 2024 and 2023 was 22.3 % and 21.8 %, respectively,

which resulted in a provision for income taxes of $ 2,144,789 and $ 344,716 , respectively.

The Company’s effective tax rate is higher

than the U.S.

federal statutory rate of 21 % due to, among other factors, state income 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 increase in the effective

tax rate when compared to the prior year was primarily due to the Company’s state income tax provision.

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

36 unchanged sentences

31, 2024 (Unaudited)

Revenues from Contracts with Customers (Continued)

from Contracts with Customers (Continued)

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

Schedule of Opening and Closing Balances of Receivables, Contract Assets and Contract Liabilities

Contract Balances

Receivables (1)

Contract Asset

Contract Liability

Opening (January 1, 2023)

Closing (September 30, 2023)

(January 1, 2024)

(March 31, 2024)

Increase/(decrease)

Contract Balances

Receivables (1)

Contract Asset

Contract Liability

Opening (January 1, 2022)

Closing (December 31, 2022)

(January 1, 2023)

(December 31, 2023)

Increase/(decrease)

Included in Receivables, net on the condensed consolidated

balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three month periods ended 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.

(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 March 31, 2024

and 2023 was $ 1,506,114 and $ 1,119,898 , respectively.

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

3 unchanged sentences

of Revenues of the Cemetery and Mortuary Contracts

Three Months Ended

September 30,

Nine Months Ended

September 30,

Major goods/service lines

goods/service lines

Net mortuary and cemetery sales

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred at a point in time

of Revenue Recognition

transferred at a point in time

Net mortuary and cemetery

2 unchanged sentences

31, 2024 (Unaudited)

Revenues from Contracts with Customers (Continued)

from Contracts with Customers (Continued)

following table reconciles revenues from cemetery and mortuary contracts to Note 7 – Business Segment Information for the Cemetery/Mortuary

1 unchanged sentence

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net mortuary and cemetery sales

Losses on investments and other assets

( 1,615,253 )

Net investment income

Other revenues

Revenues from external customers

mortuary and cemetery sales

on investments and other assets

investment income

from external customers

14) Receivables

consist of the following:

Schedule of Receivables

As of September 30, 2023

As of December 31, 2022

Contracts with customers

Receivables from sales agents

Total receivables

Allowance for doubtful accounts

March 31, 2024

December 31, 2023

with customers

from sales agents

for credit losses

( 1,755,553 )

( 1,897,887 )

Net receivables

Company records an allowance for credit losses for its receivables in accordance with GAAP.

2 unchanged sentences

of Allowance Credit Losses

Beginning balance - January 1, 2023

Change in provision for credit losses (1)

Ending balance - September 30, 2023

Beginning balance - January 1, 2022

Change in provision for credit losses (1)

Ending balance - December 31, 2022

Included in other expenses on the condensed consolidated statements

balance - January 1, 2024

in provision for credit losses (1)

balance - March 31, 2024

balance - January 1, 2023

in provision for credit losses (1)

balance - March 31, 2023

(1) Included in other expenses on the

condensed consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

10 unchanged sentences

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:

components of the cemetery perpetual care investments and obligation as of March 31, 2024, are as follows:

of Investments

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Allowance for Credit Losses

Estimated Fair Value

September 30, 2023:

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

Unrealized Gains

Unrealized Losses

for Credit Losses

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

of states and political subdivisions

fixed maturity securities available for sale

securities at estimated fair value:

miscellaneous and all other

$ ( 147,635 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 147,635 )

Mortgage loans held for investment at amortized cost:

Residential construction

loans held for investment at amortized cost:

Allowance for credit losses

Total mortgage loans held for investment

Real estate held for investment:

Cash and cash equivalents

Total cemetery perpetual care trust investments

Cemetery perpetual care obligation

mortgage loans held for investment

investment income

and cash equivalents

cemetery perpetual care trust investments

perpetual care obligation

$ ( 5,384,115 )

Trust investments in excess of trust obligations

investments in excess of trust obligations

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

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

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

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

Unrealized Gains

Unrealized Losses

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

of states and political subdivisions

securities including public utilities

fixed maturity securities available for sale

securities at estimated fair value:

miscellaneous and all other

$ ( 146,771 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 146,771 )

Mortgage loans held for investment at amortized cost:

Residential construction

Real estate held for investment:

Cash and cash equivalents

Total cemetery perpetual care trust investments

Cemetery perpetual care obligation

loans held for investment at amortized cost:

Allowance for credit losses

mortgage loans held for investment

and cash equivalents

cemetery perpetual care trust investments

perpetual care obligation

$ ( 5,326,196 )

Trust investments in excess of trust obligations

investments in excess of trust obligations

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

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

September 30, 2023

of March 31, 2024 and December 31, 2023.

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

maturity securities:

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

December 31, 2022

of states and political subdivisions

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Total unrealized losses

of states and political subdivisions

securities including public utilities

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

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

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,

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

holdings were comprised of four securities with fair values aggregating 97.8 % of the aggregate amortized cost as of March 31, 2024.

holdings were comprised of four securities with fair values aggregating 98.1 % of aggregate amortized cost as of December 31, 2023.

credit losses have been recognized for the three month periods ended March 31, 2024 and 2023, since the increase in unrealized losses

is primarily a result of increases in interest 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 March 31, 2024,

by contractual maturity.

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

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

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

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual

Maturity Date

Estimated Fair

Due in 1 year

Due in 2-5 years

Due in 5-10 years

Due in more than 10 years

in 5-10 years

in more than 10 years

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

8 unchanged sentences

31, 2024 (Unaudited)

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

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

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

assets as of March 31, 2024, are summarized as follows:

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

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Allowance for Credit Losses

Estimated Fair Value

September 30, 2023:

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

Unrealized Gains

Unrealized Losses

for Credit Losses

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

of states and political subdivisions

securities including public utilities

fixed maturity securities available for sale

securities at estimated fair value:

miscellaneous and all other

$ ( 251,408 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 251,408 )

Mortgage loans held for investment at amortized cost:

Residential construction

loans held for investment at amortized cost:

Allowance for credit losses

Total mortgage loans held for investment

Cash and cash equivalents (1)

Total restricted assets

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

insurance and mortgage segments.

mortgage loans held for investment

investment income

and cash equivalents (1)

restricted assets

(1) Including cash

and cash equivalents of $ 6,925,987 for the life insurance and mortgage segments.

assets as of December 31, 2023, 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:

Obligations of states and political subdivisions

Corporate securities including public utilities

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other

Unrealized Gains

Unrealized Losses

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

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

securities including public utilities

fixed maturity securities available for sale

securities at estimated fair value:

miscellaneous and all other

$ ( 247,996 )

Total equity securities at estimated fair value

equity securities at estimated fair value

$ ( 247,996 )

Mortgage loans held for investment at amortized cost:

Residential construction

Cash and cash equivalents (1)

Total restricted assets

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

insurance and mortgage segments.

loans held for investment at amortized cost:

Allowance for credit losses

mortgage loans held for investment

and cash equivalents (1)

restricted assets

(1) Including cash

and cash equivalents of $ 6,930,930 for the life insurance and mortgage segments.

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

31, 2024 (Unaudited)

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

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

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 March 31, 2024 and December 31, 2023.

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

maturity securities.

of Fair Value of Fixed Maturity Securities

Unrealized Losses for Less than Twelve Months

Unrealized Losses for More than Twelve Months

Total Unrealized Loss

September 30, 2023

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

December 31, 2022

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

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,

of states and political subdivisions

securities including public utilities

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

securities including public utilities

holdings were comprised of 15 securities with fair values aggregating 98.7 % of the aggregate amortized cost as of March 31, 2024.

holdings were comprised of 12 securities with fair values aggregating 99.1 % of the aggregate amortized cost as of December 31, 2023.

No credit losses have been recognized for the three month periods ended March 31, 2024 and 2023, since the increase in unrealized losses

is primarily a result of increases in interest.

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 March 31, 2024,

by contractual maturity.

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

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

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

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual

Maturity Date

Estimated Fair

Due in 1 year

Due in 2-5 years

Due in 5-10 years

Due in more than 10 years

in 5-10 years

in more than 10 years

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

5 unchanged sentences

Schedule of Changes in Accumulated Other Comprehensive Income

Three Months Ended September 30,

Nine Months Ended September 30,

Unrealized losses on fixed maturity securities available for sale

$ ( 6,725,752 )

$ ( 13,527,157 )

$ ( 6,310,923 )

$ ( 42,014,068 )

Amounts reclassified into net earnings (loss)

Net unrealized losses before taxes

( 6,805,602 )

( 13,523,240 )

( 6,580,750 )

( 41,845,274 )

( 5,376,426 )

( 10,683,359 )

( 5,198,792 )

( 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

Months Ended March 31,

gains (losses) on fixed maturity securities available for sale

$ ( 1,035,099 )

reclassified into net earnings

unrealized gains (losses) before taxes

( 1,131,650 )

(expense) benefit

( 1,095,787 )

gains (losses) on restricted assets (1)

(expense) benefit

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

(expense) benefit

comprehensive income (loss) changes

$ ( 895,098 )

Fixed maturity securities available for sale

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

(1) Fixed maturity

securities available for sale

following table presents the accumulated balances of other comprehensive income (loss) as of March 31, 2024:

Schedule of Accumulated Balances of Other Comprehensive Income

Beginning Balance December 31, 2022

Change for the period

Ending Balance September 30,

Unrealized losses on fixed maturity securities available for sale

Balance December 31, 2023

for the period

Balance March 31,

losses on fixed maturity securities available for sale

$ ( 6,876,629 )

1 unchanged sentence

$ ( 7,769,727 )

Unrealized losses on restricted assets (1)

Unrealized losses on cemetery perpetual care trust investments (1)

Other comprehensive loss

losses on restricted assets (1)

losses on cemetery perpetual care trust investments (1)

comprehensive loss

$ ( 6,885,558 )

1 unchanged sentence

$ ( 7,780,656 )

Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

following table presents the accumulated balances of other comprehensive income (loss) as of December 31, 2023:

Beginning Balance December 31, 2021

Change for the period

Ending Balance December 31,

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

Balance December 31, 2022

for the period

Balance December 31,

gains (losses) on fixed maturity securities

available for sale

$ ( 13,050,767 )

$ ( 6,876,629 )

Unrealized gains (losses) on restricted assets (1)

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

Other comprehensive income (loss)

gains (losses) on restricted assets (1)

gains (losses) on cemetery perpetual

care trust investments (1)

comprehensive income (loss)

$ ( 13,070,277 )

$ ( 6,885,558 )

Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

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