What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-16 compared with 2025-03-31 · 2412 added, 2108 removed, 1588 unchanged (74% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

2 unchanged sentences

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

Consolidated Balance Sheets, December 31, 2024 and 2023

Consolidated Statements of Earnings for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Statements at December 31, 2025 and 2024 and for the Years Ended December 31, 2025 and 2024:

Consolidated Balance Sheets

Consolidated Statements of Earnings

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements:

Note 1 - Significant Accounting Policies

Note 2 - Investments

Note 3 - Loans Held for Sale

Note 4 - Receivables

Note 5 - Restricted Assets

Note 6 - Cemetery Perpetual Care Trust Investments and Obligation

Note 7 - Mortgage Servicing Rights

Note 8 - Property and Equipment

Note 9 - Deferred Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired and Unearned Premium Reserve

Note 10 - Goodwill and Other Intangible Assets

Note 11 - Derivative Instruments

Note 12 - Future Policy Benefits and Unpaid Claims

Note 13 - Policyholder Account Balances

Note 14 - Reinsurance

Note 15 - Bank and Other Loans Payable

Note 16 - Leases

Note 17 - Income Taxes

Note 18 - Equity

Note 19 - Earnings Per Share

Note 20 - Business Segment Information

Note 21 - Fair Value of Financial Instruments

Note 22 - Stock Compensation Plans and Retirement Plans

Note 23 - Statutory Financial Information and Dividend Limitations

Note 24 - Commitments and Contingencies

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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as of December 31, 2025 and 2024, the related consolidated statements of earnings, comprehensive income, stockholders’ equity,

and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

and cash flows, for each of the two years ended December 31, 2025, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria

established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the

Treadway Commission and our report dated March 16, 2026, expressed an adverse opinion on the Company’s internal control over

financial reporting because of a material weakness.

in Accounting Principle

discussed in Note 1 to the financial statements, the Company changed its method of accounting, measurement, and disclosure of long-duration

contracts effective December 31, 2025, using the modified retrospective method applied as of the transition date of January 1, 2024,

due to adoption of ASU 2018-12, Financial Services - Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration

Contracts (“ASU 2018-12”).

The adoption is also communicated as a critical audit matter below.

financial statements are the responsibility of the Company’s management.

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financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

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reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial

included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

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does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Policy Benefits for Life Insurance Contracts and Amortization of Deferred Policy Acquisition Costs for Insurance Contracts and Value

of Business Acquired - Refer to Notes 1 and 21 to the financial statements

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

of Accounting Pronouncements - Targeted Improvements to the Accounting for Long-Duration Contracts - Refer to Note 1 to the Financial

Audit Matter Description

Company’s management sets assumptions in (1) estimating a liability for life insurance policy benefit payments that will be made

in the future (future policy benefits for life insurance contracts), (2) determining amortization of deferred policy acquisition costs

for insurance contracts and value of business acquired and (3) performing premium deficiency tests.

The most significant assumptions

include mortality, lapse, and projected investment yield.

Assumptions are determined based upon analysis of company specific experience,

industry standards, adjusted for changes in exposure and other relevant factors.

Given the inherent uncertainty of these significant

assumptions, auditing the development of such assumptions involved especially subjective judgment.

Company adopted Accounting Standards Update (ASU) 2018-12, Financial Services—Insurance (Topic 944):

Targeted Improvements to the

Accounting for Long-Duration Contracts (“ASU 2018-12”) on December 31, 2025 using the modified retrospective application as of the transition

date of January 1, 2024.

adoption of ASU 2018-12 significantly modified the Company’s accounting for and disclosure of long-duration life insurance contracts.

We identified the adoption of ASU 2018-12 as a critical audit matter because of the need to involve actuarial specialists to evaluate

assumptions and valuation models, the extent of audit effort required, and the inherent complexity involved in the selection and application

of new accounting policies.

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to management’s judgments regarding the mortality, lapse and projected investment yield assumptions used

in the development of future policy benefits for life insurance contracts and the amortization of deferred policy acquisition costs for

insurance contracts and value of business acquired, included the following, among others:

With the assistance of our actuarial specialists, we:

evaluated these actuarial assumptions, including testing the

accuracy and completeness of the supporting experience studies,

evaluated management’s judgments regarding these assumptions

used in the development of future policy benefits for life insurance contracts and the amortization of deferred policy acquisition costs

and value of business acquired,

evaluated the results of the Company’s annual premium

deficiency tests.

Deloitte & Touche LLP

audit procedures related to the adoption of ASU 2018-12 included the following, among others:

tested the effectiveness of controls over the application of new accounting policies and

disclosure of the impact of adoption discussed in Note 1 to the financial statements, including

controls over the valuation models and mortality and lapse assumptions used to estimate the liability for future

policy benefits and amortization of deferred policy acquisition costs.

evaluated the appropriateness of the Company’s selection and application of accounting

policies in connection with the adoption of the ASU 2018-12.

the assistance of our actuarial specialists, we evaluated the reasonableness of the valuation

models and assumptions used to estimate the liability for future policy benefits and amortization

of deferred policy acquisition costs.

Policy Benefits for Life Insurance Contracts and Amortization of Deferred Policy Acquisition Costs for Insurance Contracts – Certain

Underlying Assumptions for Certain Products- Refer to Notes 1, 9, and 12 to the financial statements

Audit Matter Description

Company’s management sets assumptions in (1) estimating a liability for life insurance policy benefit payments that will be

made in the future (future policy benefits for life insurance contracts) and (2) determining amortization of deferred policy

acquisition costs for insurance contracts.

The most significant assumptions include mortality and lapse.

Assumptions are determined

based on the company’s historical experience, industry data, and other factors.

inherent uncertainty of these assumptions, auditing the development of such assumptions involved especially subjective

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to management’s judgments regarding the mortality and lapse assumptions

used in the development of future policy benefits for life insurance contracts and the amortization of deferred policy acquisition

costs for insurance contracts, included the following, among others:

tested the effectiveness of controls over the development of these assumptions used in the valuation of future policy benefits and

the amortization of deferred policy acquisition costs for certain insurance products, including the effectiveness of the controls

over the underlying data.

tested the underlying data used in the development of these assumptions as well as in the valuation of future policy benefits and

the amortization of deferred policy acquisition costs for certain insurance products.

the assistance of our actuarial specialists, we:

management’s methods, calculations and judgments regarding the development of these assumptions including evaluating the results

of experience studies used as the basis for setting those assumptions.

on a sample basis, through independent calculation of future policy benefits and amortization of deferred policy acquisition costs,

the mathematical accuracy of management’s calculations, the appropriateness of valuation models, and whether these assumptions

were properly applied.

/s/ Deloitte & Touche LLP

Lake City, UT

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BALANCE SHEETS

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

(amortized cost of $ 376,012,071 and $ 390,884,441 for 2024 and 2023,

respectively;

net of allowance for credit losses of $ 420,993 and

$ 314,549 for 2024 and 2023, respectively)

Fixed maturity securities,

available for sale, at estimated fair value (amortized cost of $ 382,401,293 and $ 376,012,071 for 2025 and 2024, respectively;

allowance for credit losses of $ 579,450 and $ 420,993 for 2025 and 2024, respectively)

$ 382,777,918

$ 366,546,129

Equity securities at estimated fair value (cost of $ 11,386,454 and

$ 10,571,505 for 2024 and 2023, respectively)

Mortgage loans held for investment (net of allowance for credit losses

of $ 1,885,390 and $ 3,818,653 for 2024 and 2023, respectively)

Real estate held for investment (net of accumulated depreciation

Equity securities at estimated fair value (cost

of $ 12,206,559 and $ 11,386,454 for 2025 and 2024, respectively)

Mortgage loans held for investment (net of

allowance for credit losses of $ 2,588,918 and $ 1,885,390 for 2025 and 2024, respectively)

Real estate held for investment (net of accumulated

depreciation of $ 37,159,212 and $ 31,419,539 for 2025 and 2024, respectively)

Real estate held for sale

Other investments and policy loans (net of allowances for credit losses

of $ 1,536,926 and $ 1,553,836 for 2024 and 2023, respectively)

Other investments and policy loans (net of

allowances for credit losses of $ 1,676,468 and $ 1,536,926 for 2025 and 2024, respectively)

Accrued investment income

Total investments

1,038,862,460

Cash and cash equivalents

Loans held for sale at estimated fair value

Receivables (net of allowance for credit losses of $ 1,678,531 and

$ 1,897,887 for 2024 and 2023, respectively)

Restricted assets (including $ 12,323,535 and $ 9,239,063 for 2024 and

2023, respectively, at estimated fair value)

Cemetery perpetual care trust investments (including $ 5,689,706 and

Receivables (net of allowance for credit losses

of $ 1,428,672 and $ 1,678,531 for 2025 and 2024, respectively)

Restricted assets (including $ 16,106,168 and

$ 12,323,535 for 2025 and 2024, respectively, at estimated fair value)

Cemetery perpetual care trust investments (including

$ 6,575,744 and $ 5,689,706 for 2025 and 2024, respectively, at estimated fair value)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition costs

Mortgage servicing rights, net

Property and equipment, net

Deferred policy and pre-need contract acquisition

Value of business acquired

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BALANCE SHEETS (Continued)

Liabilities and Stockholders’ Equity

Future policy benefits and unpaid claims

Liabilities and Stockholders’

Future policy benefits and unpaid

$ 799,706,946

$ 752,080,658

Policyholder account balances

Unearned premium reserve

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract revenues

Deferred pre-need cemetery and mortuary contract

Cemetery perpetual care obligation

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40,000,000 shares authorized;

21,255,006 shares issued and outstanding as of December 31, 2024 and

21,052,883 (1) shares issued and outstanding as of December 31, 2023

non-voting common stock - $ 1.00 par value;

22,428,625 shares issued and outstanding as of December 31, 2025 and 22,321,559 (1) shares issued and outstanding as of

December 31, 2024

non-voting common stock - $ 1.00 par

5,000,000 shares authorized;

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convertible common stock - $ 2.00 par value;

6,000,000 shares

3,321,833 shares issued and

outstanding as of December 31, 2024 and 3,120,432 (1) shares issued and outstanding as of December 31, 2023

6,000,000 shares authorized;

3,587,237 shares issued and outstanding as of December 31, 2025 and 3,492,674 (1) shares issued and outstanding as of

December 31, 2024

Common stock value

Additional paid-in capital

Accumulated other comprehensive loss, net of taxes

( 6,951,266 )

( 6,885,558 )

Accumulated other comprehensive income, net

Retained earnings

Treasury stock, at cost - 1,025,784 Class A shares and 99,623 Class C shares

as of December 31, 2024;

and 852,338 (1) Class A shares and 35,503 (1) Class C

shares as of December 31, 2023

Treasury stock, at cost

- 1,095,964 Class A shares and 104,604 Class C shares as of December 31, 2025;

and 1,080,243 (1) Class A shares and 104,604 (1) Class

C shares as of December 31, 2024

( 9,088,357 )

( 8,477,686 )

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

Total stockholders’

Liabilities and Stockholders’ Equity

$ 1,561,844,604

5 unchanged sentences

Statements of Earnings

Years Ended December 31,

Insurance premiums and other considerations

Ended December 31,

Insurance premiums and other

considerations

$ 119,757,103

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Benefits and expenses:

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

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

Policyholder benefits and claims (including

the impact of assumption updates to the liability for future policy benefits of nil and nil for 2025 and 2024,

respectively)

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 – cemeteries and mortuaries

Total benefits and expenses

Earnings before income taxes

Cost of goods and services

sold – cemeteries and mortuaries

Total benefits and

Earnings before income

Income tax expense

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( 8,254,728 )

Net earnings per Class A equivalent common share ( 1 )

Net earnings per Class A equivalent common share -

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 share amounts have been adjusted retroactively

for the effect of annual stock dividends.

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

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

Net earnings per common share

represent net earnings per equivalent Class A common share.

earnings per Class A equivalent common share (1)

earnings per Class A equivalent common share - assuming dilution (1)

Weighted average Class A equivalent common

shares outstanding (1)

Weighted average Class A equivalent common

shares outstanding-assuming dilution (1)

Net earnings per share have been adjusted retroactively for

the effect of annual stock dividends.

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

the weighted-average Class C common shares determined on an equivalent Class A Common Stock basis.

Net earnings per common share represent

net earnings per equivalent Class A common share.

accompanying notes to consolidated financial statements.

1 unchanged sentence

Statements of comprehensive income

Years Ended December 31,

Ended December 31,

Other comprehensive income

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

Unrealized gains on restricted assets

Unrealized gains (losses) on cemetery perpetual care trust investments

Other comprehensive income (loss), before income tax

Income tax benefit (expense)

Unrealized gains (losses)

on fixed maturity securities available for sale

Unrealized gains on restricted

Unrealized gains (losses)

on cemetery perpetual care trust investments

rate remeasurement of future policy benefits

( 16,285,885 )

Other comprehensive income (loss), net of income tax

Comprehensive income

Other comprehensive income

(loss), before income tax

( 6,273,663 )

tax benefit (expense)

( 9,443,147 )

comprehensive income (loss), net of income tax

( 4,957,506 )

Comprehensive

accompanying notes to consolidated financial statements.

NATIONAL FINANCIAL CORPORATION

SECURITY NATIONAL FINANCIAL CORPORATION

Statements of Stockholders’ Equity

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Comprehensive

Income (Loss)

Balance at December 31, 2023

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( 8,154,955 )

Conversion Class C to Class A

Conversion Class C to

Balance at December 31, 2024

( 8,477,686 )

( 5,661,737 )

Other comprehensive loss

( 4,957,506 )

Other comprehensive income

Stock based compensation expense

7 unchanged sentences

( 11,161,294 )

Conversion Class C to Class A

Conversion Class C to

Balance at December

5 unchanged sentences

$ 410,368,728

$ ( 8,477,686 )

$ 338,782,279

accompanying notes to consolidated financial statements.

1 unchanged sentence

Statements of Cash Flows

Years Ended December 31,

Cash flows from operating activities:

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

Gains on investments and other assets

Ended December 31,

Cash flows from operating

Adjustments to reconcile

net earnings to net cash provided by operating activities:

Gains on investments and

( 4,636,377 )

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Provision for credit losses

Net amortization of deferred fees and costs, premiums and discounts

( 1,992,153 )

Net amortization of deferred

fees and costs, premiums and discounts

( 2,652,873 )

Provision for deferred income taxes

( 1,992,153 )

Policy and pre-need acquisition costs deferred

Provision for deferred

Policy and pre-need acquisition

costs deferred

( 19,926,269 )

( 21,343,031 )

Policy and pre-need acquisition costs amortized

Policy and pre-need acquisition

costs amortized

Value of business acquired amortized

Mortgage servicing rights, additions

Interest credited to policyholder

account balances

Policy fees assessed on

policyholder account balances

( 2,326,788 )

Amortization of mortgage servicing rights

Stock based compensation expense

Benefit plans funded with treasury stock

Net change in fair value of loans held for sale

( 2,306,993 )

Originations of loans held for sale

Mortgage servicing rights,

Amortization of mortgage

servicing rights

Stock based compensation

Benefit plans funded with

treasury stock

Net change in fair value

of loans held for sale

( 2,869,729 )

Originations of loans held

( 2,296,054,902 )

Proceeds from sales of loans held for sale

( 2,295,830,408 )

Proceeds from sales of

loans held for sale

2,323,112,059

Net gains on sales of loans held for sale

2,338,209,587

Net gains on sales of loans

held for sale

( 52,436,365 )

Change in assets and liabilities:

Land and improvements held for sale

( 45,383,321 )

Future policy benefits and unpaid claims

Other operating assets and liabilities

Change in assets and liabilities:

Land and improvements held

( 1,430,941 )

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed maturity securities

Future policy benefits

and unpaid claims

operating assets and liabilities

cash provided by operating activities

Cash flows from investing

Purchases of fixed maturity

( 68,178,727 )

( 85,235,694 )

Sales, calls and maturities of fixed maturity securities

Sales, calls and maturities

of fixed maturity securities

Purchase of equity securities

2 unchanged sentences

Sales of equity securities

Purchases of restricted assets

Purchases of restricted

( 7,620,974 )

( 6,039,118 )

Sales, calls and maturities of restricted assets

Purchases of cemetery perpetual care trust investments

Sales, calls and maturities

of restricted assets

Purchases of cemetery perpetual

care trust investments

( 1,428,243 )

( 4,615,717 )

Sales, calls and maturities of cemetery perpetual care trust investments

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

Sales, calls and maturities

of cemetery perpetual care trust investments

Mortgage loans held for

investment, other investments and policy loans made

( 856,738,839 )

( 740,739,575 )

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

Purchases of property and equipment

Payments received for mortgage

loans held for investment, other investments and policy loans

Purchases of property and

( 1,691,272 )

4 unchanged sentences

( 52,348,798 )

Sales of real estate

Net cash provided by (used in) investing activities

of real estate

cash used in investing activities

( 67,207,826 )

( 43,134,064 )

NATIONAL FINANCIAL CORPORATION

Statements of Cash Flows (Continued)

Years Ended December 31,

Cash flows from financing activities:

Investment contract receipts

Investment contract withdrawals

Ended December 31,

Cash flows from financing

account balances - deposits

Policyholder account balances

- withdrawals

( 16,336,822 )

( 15,631,260 )

Proceeds from stock options exercised

Proceeds from stock options

Purchase of treasury stock

5 unchanged sentences

Proceeds from bank loans

Net change in warehouse line borrowings for loans held for sale

change in warehouse line borrowings for loans held for sale

( 6,414,000 )

Net cash used in financing activities

cash used in financing activities

( 14,322,583 )

( 4,006,565 )

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

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

beginning of year

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

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

( 35,990,512 )

Cash, cash equivalents,

restricted cash and restricted cash equivalents at beginning of year

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

$ 114,112,108

Supplemental Disclosure of Cash Flow Information:

$ 150,102,620

Supplemental Disclosure

of Cash Flow Information:

Cash paid during the year for:

Non Cash Investing and Financing Activities:

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

Loans held for sale foreclosed into real estate held for sale

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

Loans held for sale foreclosed into receivables

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

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

Transfer from mortgage loans held for investment to restricted assets

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

Federal Income taxes

State Income taxes

Non Cash Investing and Financing

Right-of-use assets obtained

in exchange for operating lease liabilities

Fixed maturity securities

available for sale transferred into other investments

Mortgage loans held for

investment foreclosed into real estate held for sale

Loans held for sale foreclosed

into real estate held for sale

Right-of-use assets obtained

in exchange for finance lease liabilities

Loans held for sale foreclosed

into receivables

Reconciliation

1 unchanged sentence

in the table below:

Years Ended December 31,

Ended December 31,

Cash and cash equivalents

2 unchanged sentences

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

$ 114,112,108

5 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

4 unchanged sentences

The life insurance segment is engaged in the business of selling and servicing

selected lines of life insurance, annuity products and accident and health insurance marketed primarily in the states located in western,

mid-western and southern regions of the United States.

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

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

The mortgage segment is

an approved government and conventional lender that originates and underwrites residential and commercial loans for new construction,

existing homes, and real estate projects primarily in Florida, Nevada, Texas, and Utah.

selected lines of life insurance and annuity products marketed primarily in the states located in western, mid-western and southern regions

of the United States.

The cemetery and mortuary segment of the Company consists of eleven mortuaries and five cemeteries in Utah, one

cemetery in California, and four mortuaries and one cemetery in New Mexico.

The mortgage segment is an approved government and conventional

lender that originates and underwrites residential and commercial loans for new construction, existing homes, and real estate projects

primarily in Arizona, California, Florida, Texas, and Utah.

of Presentation

18 unchanged sentences

all material respects.

Reclassifications

prior-period amounts have been reclassified to conform to the current-period presentation.

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

7 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

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

17 unchanged sentences

estate held for sale is carried at lower of cost or fair value, less estimated costs to sell.

Included, if any, are foreclosed properties.

These properties are recorded at the lower of cost or fair value upon

Depreciation is not recognized on real

5 unchanged sentences

The provision

(release) for credit losses for fixed maturity securities held for sale are also included in gains (losses) on investments.

2 for more information regarding the Company’s evaluation of credit losses.

(release) for credit losses for fixed maturity securities available for sale are also included in gains (losses) on investments.

Note 2 for more information regarding the Company’s evaluation of credit losses.

and Cash Equivalents

15 unchanged sentences

derivatives used for these assets.

See Note 3 and Note 17 to Consolidated Financial Statements for additional disclosures regarding loans

held for sale.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse unless defects are identified

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Company, through its mortgage subsidiary, sells mortgage loans to third-party investors without recourse unless defects are identified

in the representations and warranties made at loan sale.

7 unchanged sentences

declines purchase, and

● Discontinued

product and expired commitment.

12 unchanged sentences

purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month period, the

loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and previously recorded

mortgage fee income that was to be received from a third-party investor is written off against the loan loss reserve.

Any loan that later

becomes delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.

loans are referred to as scratch and dent, within the loans held for sale portfolio.

Any previously recognized gain-on-sale or mortgage

fee income related to the loan is reversed through earnings.

Scratch and dent loans are recorded at fair value.

The Company may reclassify

a scratch and dent loan to mortgage loans held for investment.

At that time, the Company establishes an allowance for credit losses in

accordance with the current expected credit loss (“CECL”) model over the contractual term of the loan.

The allowance is updated

each reporting period based on changes in credit quality, including delinquency status.

cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the Company.

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loans that are non-committed that have an active market, the Company uses the market price.

loans that are non-committed where there is no market but there is a similar product, the

Company uses the fair value for the similar product.

loans that are non-committed where no active market exists, the Company determines that the

unpaid principal balance best approximates the fair value, after considering the fair value

of the underlying real estate collateral, estimated future cash flows, and the loan interest

loans that are non-committed where there is no market but there is a similar product, the Company uses the fair value for the similar

loans that are non-committed where no active market exists, the Company determines that the unpaid principal balance best approximates

the fair value, after considering the fair value of the underlying real estate collateral, estimated future cash flows, and the loan

interest rate.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

appraised value of the real estate underlying the original mortgage loan adds support to the Company’s determination of fair value

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a component of mortgage fee income.

See Note 3 and Note 17 to Consolidated Financial Statements for additional disclosures regarding

loans held for sale and mortgage fee income.

loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on loans sold

to third-party investors classified as loans held for sale on the consolidated balance sheets.

The Company may be required to reimburse

third-party investors for costs associated with early payoff of loans within six months of origination of such loans and to repurchase

loans where there is a default, in any, of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated

fee to the investors.

The Company’s estimates are based upon historical loss experience and the best estimate of the probable loan

loss liabilities.

Note 3 and Note 21 for additional disclosures regarding loans held for sale and mortgage fee income.

loan loss reserve, included in other liabilities and accrued expenses on the consolidated balance sheets, is an estimate of probable

losses at the balance sheet date that the Company will realize in the future on loans sold to third-party investors classified as loans

held for sale on the consolidated balance sheets.

The Company may be required to reimburse third-party investors for costs associated

with early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default, in any, of

the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors.

The Company’s

estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities

25 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

assets are assets held in a trust account for future mortuary services and merchandise.

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funded its medical benefit safe-harbor limit based on the qualified direct costs and has included this amount as a component of restricted

Additional information related to restricted assets is included in Notes 2 and 8 to Consolidated Financial Statements.

Additional information related to restricted assets is included in Notes 2 and 5.

Perpetual Care Trust Investments

4 unchanged sentences

Additional information related

to cemetery perpetual care trust investments is included in Notes 2 and 8 to Consolidated Financial Statements.

to cemetery perpetual care trust investments is included in Notes 2 and 6.

Land and Improvements

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a sale of that lot is met.

Policy Acquisition Costs

and other costs, net of commission and expense allowances for reinsurance ceded, that vary with and are primarily related to the production

of new insurance business have been deferred.

Deferred policy acquisition costs (“DAC”) for traditional life insurance are

amortized over the premium paying period of the related policies using assumptions consistent with those used in computing policy benefit

For interest-sensitive insurance products, deferred policy acquisition costs are amortized generally in proportion to the present

value of expected gross profits from surrender charges, investment, mortality, and expense margins.

This amortization is adjusted when

estimates of current or future gross profits to be realized from a group of products are reevaluated.

Deferred acquisition costs are

written off when policies lapse or are surrendered.

accounting for DAC, the Company considers internal replacements of insurance and investment contracts.

An internal replacement is a modification

in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, or by amendment, endorsement,

or rider to contract, or by the election of a feature or coverage within a contract.

Modifications that result in a replacement contract

that is substantially changed from the replaced contract are accounted for as an extinguishment of the replaced contract.

DAC, unearned revenue liabilities and deferred sales inducements from the replaced contract are written off.

Modifications that result

in a contract that is substantially unchanged from the replaced contract are accounted for as a continuation of the replaced contract.

of Business Acquired

of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized

like deferred policy acquisition costs.

The critical issues explained for deferred acquisition costs would also apply for the value of

business acquired.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

Deficiency and Loss Recognition Testing

least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)

recorded for life insurance and annuity products.

The Company tests for recoverability by using the Company’s current best-estimate

assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns.

These tests evaluate whether

the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets.

These cash flows consist primarily

of premium income, less benefits, and expenses.

If the current contract liabilities plus the present value of future premiums is greater

than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium

reserve balances, then the capitalized assets are deemed recoverable.

The present values are calculated using the best estimate of the

after-tax net investment earned rate.

Servicing Rights

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in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

rate risk, prepayment risk, and default risk are inherent risks in MSR valuation.

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Company periodically assesses MSRs for impairment.

Impairment occurs when the current fair value of the MSR falls below the asset’s

carrying value (carrying value is the amortized cost reduced by any related valuation allowance).

If MSRs are impaired, the impairment

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

Impairment occurs when the current fair value of the MSR falls below the carrying

value (carrying value is the amortized cost reduced by any related valuation allowance).

If MSRs are impaired, the impairment is recognized

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

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

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

information related to MSRs is included in Note 7.

and Equipment

and equipment are recorded at cost.

Depreciation is calculated principally on the straight-line method over the estimated useful lives

of the assets which range from three to forty years .

Leasehold improvements paid for by the Company as a lessee are amortized over the

lesser of the useful life or remaining lease terms.

Depreciation is calculated principally on the straight-line method over the estimated useful

lives of the assets which range from 3 three

Leasehold improvements paid for by the Company as a lessee are amortized over the lesser of the useful life or

remaining lease terms.

Additional information related to property and equipment is included in Note 8.

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

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at the lower of carrying amount or fair value less costs to sell.

Additional information related to long-lived assets is included in

Notes 2 and 8.

Policy Acquisition Costs and Value of Business Acquired

and other acquisition costs, net of commission and expense allowances for reinsurance ceded, that vary with and are primarily related

to the production of new insurance business that have been incurred are deferred.

For traditional long-duration life insurance products,

deferred policy acquisition costs (“DAC”) are amortized on a constant-level basis established on a cohort-grouped contract

basis over the expected term of the related contracts, with the amortization basis being units in force using assumptions consistent

with those used in computing the liability for future policy benefits.

For policyholder account balance insurance products, DAC is amortized

using the policy counts for annuities and units in-force for interest sensitive life products.

Deferred acquisition costs are written

off when policies terminate.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

accounting for DAC, the Company considers internal replacements of insurance and investment contracts.

An internal replacement is a modification

in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, or by amendment, endorsement,

or rider to contract, or by the election of a feature or coverage within a contract.

Modifications that result in a replacement contract

that is substantially changed from the replaced contract are accounted for as an extinguishment of the replaced contract.

DAC and unearned revenue liabilities from the replaced contract are written-off.

Modifications that result in a contract that is substantially

unchanged from the replaced contract are accounted for as a continuation of the replaced contract.

of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized

in the same way as DAC.

information related to DAC and VOBA is included in Note 9.

and Other Intangible Assets

acquisitions have been accounted for as purchases under which assets acquired, and liabilities assumed were recorded at their fair values

with the excess purchase price recognized as goodwill.

The Company evaluates annually or when changes in circumstances warrant the recoverability

of goodwill and if there is a decrease in value, the related impairment is recognized as a charge against income.

intangibles are recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or

whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged,

either individually or in combination with a related contract, asset, or liability.

The Company engages a third-party valuation firm

to analyze the value of the intangible assets that result from significant acquisitions.

The value of the intangible assets that result

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

information related to goodwill and other intangible assets is included in Note 10.

Banking Derivatives

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of the loan commitment.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

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

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

Sale Commitments

Company utilizes forward commitments to economically hedge the price risk associated with its outstanding mortgage loan commitments.

A forward commitment protects the Company from losses on sales of the loans arising from exercise of the loan commitments.

A forward commitment protects the Company from losses on sales of the loans arising from the exercise of the loan commitments.

expects these types of commitments will experience changes in fair value in contrast to changes in fair value of the loan commitments,

4 unchanged sentences

expenses on the consolidated balance sheets.

and Put Option 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 were shown in other liabilities

and accrued expenses on the consolidated balance sheets.

information related to derivative instruments is included in Note 11.

for Credit Losses

7 unchanged sentences

Amounts are written off against the allowance for credit losses when determined to be uncollectible.

See below under Recent Accounting Pronouncements regarding the adoption of ASU 2016-13.

See Notes 2 and 4 to Consolidated Financial Statements

regarding the Company’s evaluation of allowances for credit losses.

Policy Benefits and Unpaid Claims

policy benefit reserves for traditional life insurance are computed using a net level method, including assumptions as to investment

yields, lapse rates, surrender rates, dividend crediting rates, mortality, morbidity, and other assumptions based on the life insurance

subsidiaries’ historical experience, industry standards, and best estimate of future results, modified as necessary to give effect

to anticipated trends and to include provisions for possible unfavorable deviations.

Such liabilities are, for some plans, graded to

equal statutory values or cash values at or prior to maturity, which are deemed a reasonable equivalent for GAAP.

The range of assumed

interest rates for all traditional life insurance policy reserves was 4 % to 10 %.

Benefit reserves for traditional limited-payment life

insurance policies include the deferred portion of the premiums received during the premium-paying period.

Deferred premiums are recognized

as income over the life of the policies.

Policy benefit claims are charged to expense in the period the claims are incurred.

in future policy benefits are charged to expense.

See Notes 2 and 4 regarding the Company’s evaluation of allowances for credit losses.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

policy benefit reserves for interest-sensitive insurance products are computed under a retrospective deposit method and represent policy

account balances before applicable surrender charges.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Policy Benefits and Unpaid Claims

liability for future policy benefits is accrued as premium revenue is recognized, which is the present value of expected future

policy benefits to be paid to or on behalf of policyholders less the present value of expected future net premiums to be collected

from policyholders.

This liability is calculated using a discount rate assumption that is an upper-medium grade fixed-income

instrument yield as provided by Bloomberg’s Evaluated Pricing (“BVAL”) methodology.

This discount rate for a

particular cohort is locked-in when that cohort is closed to new contracts and is used for purposes of interest accretion for the

future policy benefits liability and is reflected in policyholder benefits and claims on the consolidated statements of earnings.

The current rate as of each reporting date is used to calculate an adjusted future policy benefit liability and is recognized

through accumulated other comprehensive income (“AOCI”).

Other assumptions include best-estimate mortality and lapse rates that are based on

the company’s historical experience, industry data, and other factors;

also estimates of expected non-level costs, such as

termination or settlement costs.

Routine policy maintenance costs are not included.

These assumptions are reviewed at least

Any changes to these assumptions will be reflected in policyholder benefits and claims on the consolidated statements of

Cohorts are established based on differences in Company (Acquisition), Direct Business v.

Acquired, Market (Final Expense

Ordinary), Limited-Payment v.

Whole Life v.

Term, issue year, and significant reinsurance.

A deferred profit

liability (“DPL”) is also held.

The DPL equals accumulated deferrals (prior to and including the valuation date) minus accumulated

amortization, where “deferrals” equals the difference between gross and net premium, and “amortization”

equals the product of the measure of in force policies (units in force) and an amortization ratio which is updated at the same time

as the net premium ratio.

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

recoverable receivable amount, if any, for claims reported.

There is also an unpaid claims liability for claims incurred but not reported.

This liability is based on the historical experience of the net amount of claims that were reported in reporting periods subsequent to

the reporting period when claims were incurred.

information related to future policy benefits and unpaid claims is included in Note 1 for the adoption of Accounting Standards Update

(“ASU”) 2018-12 and in Note 12.

Account Balances

account balances for interest-sensitive insurance products are computed under a retrospective deposit method and represent policy account

balances before applicable surrender charges.

Policy benefits and claims that are charged to expense include benefit claims incurred

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3 % to 6.5 %.

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

recoverable amount for claims reported.

There is also an unpaid claims liability for claims incurred but not reported.

This liability

is based on the historical experience of the net amount of claims that were reported in reporting periods subsequent to the reporting

period when claims were incurred.

Additional information related to policyholder account balances is included in Note 13.

Premium Reserve

universal life products the Company services have significant policy initiation fees (front-end load) that are deferred and amortized

into revenues over the estimated expected gross profits from surrender charges and investment, mortality, and expense margins.

issues that impact deferred acquisition costs apply to unearned revenue.

initiation fees (front end loads) assessed on universal life–type contracts that are not related to future services are deferred

as an unearned revenue liability.

The deferred amount is amortized into earnings analogous to the amortization of the deferred acquisition

costs of this block of business.

Additional information related to the unearned premium reserve is included in Note 9.

Participating

business constituted 2 % of insurance in force for the years ended 2024 and 2023.

The provision for policyholders’ dividends included

in policyholder obligations is based on dividend scales anticipated by management.

The amounts to be paid are determined by the Company’s

Board of Directors.

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

statements of earnings.

of Insurance Premiums and Other Considerations

business constituted less than 1 % of insurance in force for the years ended 2025 and 2024.

The provision for policyholders’ dividends

included in policyholder obligations is based on dividend scales anticipated by management.

The amounts to be paid are determined by

the Company’s Board of Directors.

The expense recognized for policyholder dividends is included in policyholder benefits and claims

on the consolidated statements of earnings and is immaterial.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Premiums and Other Considerations

and other considerations for traditional life insurance products (which include those products with fixed and guaranteed premiums and

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Interest credited to policyholder

account balances and benefit claims more than policyholder account balances are reported as expenses, included in death benefits, in

account balances and benefit claims more than policyholder account balances are reported as expenses, included in policyholder benefits and claims, in

the consolidated financial statements.

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certain life insurance policies and certain other policy-related liabilities of the insurance company.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with

2 unchanged sentences

connection with reinsurance ceded are accounted for as a reduction of the related policy acquisition costs and are deferred and amortized

Additional information related to reinsurance is included in Note 14.

Sales and Costs

5 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

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

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However, management believes that given current inflation rates and related price increases of goods and services, the risk of exposure

acquisitions have been accounted for as purchases under which assets acquired, and liabilities assumed were recorded at their fair values

with the excess purchase price recognized as goodwill.

The Company evaluates annually or when changes in circumstances warrant the recoverability

of goodwill and if there is a decrease in value, the related impairment is recognized as a charge against income.

intangibles are recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or

whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged,

either individually or in combination with a related contract, asset, or liability.

The Company engages a third-party valuation firm

to analyze the value of the intangible assets that result from significant acquisitions.

The value of the intangible assets that result

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

information related to pre-need sales and costs is included in Note 4.

taxes include taxes currently payable plus deferred taxes.

15 unchanged sentences

Estimated interest and penalties related to uncertain tax penalties are included as a component of income tax expense.

Per Common Share

Additional information

related to income taxes is included in Note 1 for the adoption of ASU 2023-09 and Note 17.

Company computes earnings per share, which requires a presentation of basic and diluted earnings per share.

7 unchanged sentences

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

Additional information related to earnings

per share is included in Note 19.

Based Compensation

5 unchanged sentences

in exchange for the award and is included in personnel expenses on the consolidated statements of earnings.

Additional information related

to stock-based compensation is included in Note 22.

Concentration

4 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Accounting Pronouncements

Standards Adopted in 2025

“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.

The Company adopted ASU 2023-07 retrospectively for the annual period beginning

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

The adoption of ASU 2023-07 did not affect the Company’s

financial position or results of operations.

Refer to Note 15 for the disclosures regarding the Company’s business segments.

Standards Adopted in 2023

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

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

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

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

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

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

the net amount expected to be collected.

For available for sale debt securities Topic 326 requires that credit losses be presented as

an allowance rather than as a write-down.

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

decreased the opening balance of retained earnings in stockholders’ equity by $ 671,506 on January 1, 2023.

The allowances for credit

losses increased (decreased) by the following amounts.

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

Mortgage loans held for investment:

$ ( 192,607 )

Restricted assets - mortgage

loans held for investment:

Cemetery perpetual care trust

investments - mortgage loans held for investment:

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

Standards Issued But Not Yet Adopted

“Financial Services – Insurance (Topic 944):

15 unchanged sentences

December 15, 2024, and interim reporting periods beginning after December 15, 2025.

The Company will adopt the standard commencing with

its annual reporting period ending December 31, 2025.

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

standard, including 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 adoption of this guidance is expected

to have an impact on its financial position, results of operations, and disclosures, as well as systems, processes and controls.

Company continues to evaluate the impact of the new guidance on its consolidated financial statements.

On December 31, 2025, the Company adopted ASU No.

2018-12, using the modified retrospective approach, for changes to the liability for future policy benefits and deferred policy acquisition

The Company applied the guidance as of a transition date of January 1, 2024, and retrospectively adjusted prior period amounts

to reflect the new guidance.

The Company’s consolidated financial statements are presented under the new guidance for reporting

periods beginning January 1, 2024.

adoption, cash flow assumptions, such as mortality, lapse, and expense, will be reviewed at least annually and, if necessary, they will

be updated to reflect actual experience and current expectations in the calculation of the Company’s future policy benefits.

Historically,

cash flow assumptions were locked in at policy issuance and remained in place for the life of the business—even when material variances

emerged between assumptions and actual experience—except in the case of a premium deficiency.

Under the new guidance, net premiums

are capped at 100 percent of gross premiums at the cohort level.

Adoption of this standard also requires changes in the future treatment

of the Company’s Deferred Acquisition Cost (“DAC”) asset.

Historically,

the interest rate used to calculate the Company’s future policy benefits was set at policy issuance and remained in effect for

the life of the policy.

The Company used an expected investment portfolio rate of return based on a conservative experience assumption.

The new guidance seeks to improve reporting on the financial impact associated with interest rate sensitivity.

To accomplish this, future

policy benefits are calculated using a discount rate based on an upper-medium-grade (A-rated) fixed income instrument.

initial future policy benefit for each cohort is calculated using the original discount rate and then remeasured using the current discount

The original rate is used to determine interest accretion on the liability—which is included in net earnings—as

well as to calculate the net premiums in both scenarios.

The impact of remeasurement, from the original locked-in discount rate to the

current rate, is reported as a component of the Company’s AOCI.

This original discount rate is locked in at the cohort’s

inception or at the Transition Date and will continue to be used in determining the impact on future net earnings associated with that

is used by insurance companies to defer costs related to acquiring insurance policies.

Under the new guidance, amortization methods are

simplified, and DAC for all insurance contracts will be subject to constant-level basis amortization over the lifetime of the policy.

Historically, traditional life contracts were amortized in proportion to premiums over the expected premium-paying period.

Additionally,

shadow DAC is no longer reported.

requirements of the new guidance did not impact capital and surplus or net income under statutory accounting practices, cash flows on

the Company’s policies, or the underlying economics of the Company’s business.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

following table presents a summary of the January 1, 2024 transition date impact by providing a roll forward of the ending reported balances

as of December 31, 2023, to the opening balances as of January 1, 2024 for the impacted consolidated balance sheet line items.

of Recent Accounting Pronouncements

from Reinsurers

Policy Acquistion Costs

of Business Acquired

Policy Benefits and Unpaid Claims

Premium Reserve

Other Comprehensive Income (loss)

Balance as reported, December 31, 2023

$ 116,351,067

$ 916,038,616

$ ( 6,885,558 )

$ 206,978,373

Effect of discount rate remeasurement of future

policy benefits

( 6,775,997 )

Removal of related amounts in accumulated other

comprehensive income (loss)

Other balance sheet reclassifications

and adjustments

Balance as adjusted, January 1, 2024

$ 116,354,598

$ 909,273,251

$ ( 1,791,856 )

$ 206,840,229

transition date impacts associated with the adoption of ASU No.

2018-12 were applied as follows:

Policy Benefits (“FPB”) (See Note 12)

in-force as of the transition date were grouped into cohorts;

a revised NPR was calculated for each cohort using the existing transition

date balance, best estimate cash flow assumptions without a provision for adverse deviation, and the historical discount rates used

for the contracts within the cohort prior to the adoption of ASU No.

2018-12 (the “locked-in” discount rate).

cohorts where the net premiums exceeded gross premiums (NPR exceeded 100%), the FPB was increased by $ 10,214 for the excess of net

premiums over gross premiums, with a corresponding adjustment recorded to opening retained earnings as of the transition date;

difference between the FPB calculated at the current upper-medium grade discount rate and the FPB calculated at the locked-in discount

rate was recorded as an adjustment to opening accumulated other comprehensive income as of the transition date;

Corresponding

adjustments were made to ceded reinsurance balances.

Limited-payment

long-duration products transition follows a similar approach to traditional non-participating products, except that these product cohorts

may have a deferred profit liability (“DPL”) which is adjusted at the transition date.

If an increase to FPB depleted the

DPL, the remaining adjustment was recorded to opening retained earnings as of the transition date.

Acquisition Costs (“DAC”) and Value of Business Acquired (“VOBA”) (See Note 9)

opening balances of these accounts were adjusted for the removal of the related amounts in accumulated other comprehensive income, as

these balances are no longer amortized using expected future gross premiums, margins, profits or earned premiums.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

following tables present amounts as previously reported in 2024, the effect upon those amounts from the adoption of the new guidance

under ASU No.

2018-12, and the resulting adjusted amounts that are reflected in the consolidated financial statements included herein.

The following tables only include those line items impacted by the adoption of the new guidance.

of Error Correcetion Prior Period Adjustments

Consolidated Balance

Receivable from reinsurers

Deferred policy and pre-need contract acquisition

Value of business acquired

1,489,807,214

1,494,462,314

Future policy benefits and unpaid claims

( 49,923,869 )

Unearned premium reserve

Total liabilities

1,151,024,935

( 38,461,048 )

1,112,563,887

Stockholders’ Equity:

Accumulated other comprehensive income (loss),

( 6,951,266 )

Retained earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

$ 1,489,807,214

$ 1,494,462,314

Consolidated Statements

Ended December 31, 2024

Benefits and expenses:

Policyholder benefits and claims

$ 100,613,091

Amortization of deferred policy and pre-need

costs and value of business acquired

( 4,927,755 )

Total benefits and expenses

( 3,270,123 )

Earnings before income taxes

Income tax expense

( 7,568,002 )

( 8,254,728 )

Net earnings per Class A equivalent common

assuming dilution (1)

Adjusted retroactively for the effect of annual stock dividends

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Consolidated Statements

of Comprehensive Income:

Ended December 31, 2024

Other comprehensive income:

Unrealized gains (losses) on fixed maturity

available for sale

Interest rate remeasurement of future policy

Other comprehensive income (loss), before income

Income tax benefit (expense)

( 9,457,229 )

( 9,443,147 )

Other comprehensive income (loss), net of income

Comprehensive income (loss)

Consolidated Statement

of Stockholders’ Equity:

Ended December 31, 2024

Accumulated other comprehensive

income (loss)

$ ( 6,951,266 )

Retained earnings

Total stockholders’ equity

$ 338,782,279

$ 381,898,427

Consolidated Statement

of Cash Flows:

Ended December 31, 2024

Cash flows from operating activities:

Provision for deferred income taxes

Policy and pre-need acquisition costs amortized

( 4,554,691 )

Value of business acquired amortized

Future policy benefits and unpaid claims

“Income Taxes (Topic 740):

9 unchanged sentences

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

ASU 2023-09 is effective for the Company for the annual reporting

periods beginning January 1, 2025.

The Company will adopt the standard commencing with its annual reporting period ending December 31,

The Company does not anticipate that the adoption of ASU 2023-09 will have a material impact on the consolidated financial statements.

The Company adopted ASU 2023-09 retrospectively for the annual period

beginning January 1, 2025.

The adoption of this standard did not affect the Company’s financial position or results of operations.

Refer to Note 16 for the disclosures regarding income taxes.

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

1) Significant

Accounting Policies (Continued)

Standards Issued But Not Yet Adopted

“Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40):

9 unchanged sentences

Accordingly, the Company will adopt the standard commencing with its annual reporting period ending December

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

The Company is in the process of estimating the potential impact of this new standard on the consolidated financial statements.

“Interim Reporting (Topic 270):

Narrow-Scope Improvements” — Issued in December 2025, ASU 2025-11

clarifies the form, content, and disclosure requirements for interim financial statements and the application of Topic 270.

differentiates requirements by entity type:

SEC registrants must continue to follow SEC rules for condensed financial statements;

registrants may present either full or condensed statements, using either the ASU’s guidance or SEC-style condensed guidance;

not-for-profit entities follow the non-SEC model with additional presentation considerations specific to NFP reporting.

compiles a comprehensive list of required interim disclosures for condensed statements from across the Codification, supported by conforming

edits, to improve usability (while not replacing underlying guidance).

In addition, the ASU reinforces a disclosure principle requiring

entities to provide interim disclosures for significant events or transactions that have had a material effect since the most recent

year-end, such as changes in accounting principles, key estimates, financing arrangements, long-term contracts, or the reporting entity.

The amendments are effective for public business entities for interim periods within annual periods beginning after December 15, 2027,

with early adoption permitted.

The guidance may be applied prospectively or retrospectively.

The Company is in the process of estimating

the potential impact of this new standard on the consolidated financial statements.

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

1 unchanged sentence

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Company’s investments as of December 31, 2025, are summarized as follows:

Schedule of Investments

Unrealized Gains

Unrealized Losses (1)

for Credit Losses

Fixed maturity securities,

available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

of Investments

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Government agencies

$ ( 486,976 )

of states and political subdivisions

securities including public utilities

Obligations of states and

political subdivisions

Corporate securities including

public utilities

( 3,387,651 )

Mortgage-backed

Mortgage-backed securities

( 3,553,214 )

5 unchanged sentences

$ 382,777,918

Equity securities at estimated

Equity securities at estimated fair value:

Common stock:

miscellaneous and all other

Industrial, miscellaneous

and all other

$ ( 332,937 )

1 unchanged sentence

$ ( 332,937 )

Mortgage loans held for investment

at amortized cost:

Unamortized deferred loan fees, net

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred

loan fees, net

( 1,995,795 )

Allowance for credit losses

Allowance for credit

( 2,588,918 )

Net discounts

mortgage loans held for investment

Total mortgage loans

held for investment

$ 322,435,385

Real estate held for investment

- net of accumulated depreciation:

real estate held for investment

Real estate held for investment - net of

accumulated depreciation:

Total real estate

held for investment

$ 214,897,130

Real estate held for sale:

real estate held for sale

Other investments and policy

loans at amortized cost:

Home Loan Bank stock (2)

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank

Other investments

Allowance for credit losses for insurance assignments

( 1,676,468 )

policy loans and other investments

investment income

Total policy loans and

other investments

Accrued investment

Total investments

$ 1,038,862,460

(1) Gross unrealized

losses are net of allowance for credit losses

(2) Includes $ 553,900

of Membership stock and $ 1,851,000 of Activity stock due to short-term advances and letters of credit.

Gross unrealized losses are net of allowance for credit losses

Includes $ 581,600 of Membership stock and $ 64,900 of Activity

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

Unrealized Gains

Unrealized Losses (1)

for Credit Losses

Fixed maturity securities,

available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Government agencies

$ ( 486,976 )

$ ( 1,416,448 )

$ 110,378,730

of states and political subdivisions

securities including public utilities

Obligations of states and

political subdivisions

Corporate securities including

public utilities

( 6,922,871 )

Mortgage-backed

Mortgage-backed securities

( 4,244,640 )

5 unchanged sentences

$ 366,546,129

Equity securities at estimated

Equity securities at estimated fair value:

Common stock:

4 unchanged sentences

$ ( 591,340 )

Mortgage loans held for investment

at amortized cost:

$ 103,153,587

Unamortized deferred loan fees, net

Mortgage loans held for investment at amortized

Residential construction

Unamortized deferred

loan fees, net

( 2,082,241 )

Allowance for credit losses

Allowance for credit

( 1,885,390 )

Net discounts

Total mortgage loans held

for investment

Total mortgage loans

held for investment

$ 301,747,358

Real estate held for investment

- net of accumulated depreciation:

Total real estate held

for investment

Real estate held for investment - net of

accumulated depreciation:

Total real estate

held for investment

$ 197,693,338

Real estate held for sale:

Total real estate held

Other investments and policy

loans at amortized cost:

Home Loan Bank stock (2)

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank

Other investments

Allowance for credit losses for insurance assignments

( 1,536,926 )

Total policy loans and other

Accrued investment income

Total policy loans and

other investments

Accrued investment

Total investments

$ 966,390,748

(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.

Gross unrealized losses are net of allowance for credit losses

Includes $ 553,900 of Membership stock and $ 1,851,000 of Activity

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

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

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

were no investments in fixed maturity or equity securities, 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 December 31, 2025, other than investments issued

or guaranteed by the United States Government.

Maturity Securities

1 unchanged sentence

as of December 31, 2025, and 2024.

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

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 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

The fair values of fixed maturity securities that are actively traded are based on quoted market prices.

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 tables set 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

2 unchanged sentences

At December 31, 2025

securities and obligations of U.S.

Treasury securities and obligations

Government agencies

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Mortgage-backed

$ 122,136,098

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Redeemable preferred stock

$ 106,054,507

At December 31, 2024

Treasury securities and

obligations of U.S.

Treasury securities and obligations of

Government agencies

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Mortgage-backed

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

$ 122,136,098

1 unchanged sentence

holdings were comprised of 338 securities with fair values aggregating 93.6 % of the aggregated amortized cost as of December 31, 2025

Relevant holdings were comprised of 606 securities with fair values aggregating 94.9 % of the aggregated amortized cost as of December

Credit loss provision of $ 106,444 and $ 325,314 have been recognized for 2024 and 2023, respectively.

Credit losses are included

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

Other unrealized losses for which no credit

loss was recognized are primarily the result of increases in interest rates.

compared to 706 securities with fair values aggregating 94.9 % of the aggregated amortized cost as of December 31, 2024.

A credit loss

provision of $ 342,957 and $ 106,444 have been recognized for 2025, and 2024, respectively.

Credit losses are included in gains (losses)

on investments and other assets on the consolidated statements of earnings.

Other unrealized losses for which no credit loss was recognized

are primarily the result of increases in interest rates.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

of Allowance for Credit Losses

Note 1 regarding the adoption of ASU 2016-13.

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

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

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

and other industry rating agencies.

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

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

Securities with ratings of 3 to 5 are evaluated

for credit loss.

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

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

in the NAIC rating.

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

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

Securities with a rating of 6 are automatically

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

Securities with a NAIC rating of 1 or 2 are considered investment grade and are only reviewed for

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

Securities with NAIC ratings of 3 to 5 are

considered non-investment grade and are evaluated for credit loss.

The evaluation involves assessing all facts and circumstances surrounding

each security including, but not limited to, historical values, interest payment history, projected earnings, and revenue growth rates

as well as a review of the reason for a downgrade in the NAIC rating.

Based on the analysis of a security that is rated 3 to 5, a determination

is made whether the security will likely make payments in accordance with the terms of the financial instrument.

Securities with a rating

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

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

6 unchanged sentences

on the 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

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

the 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.

2 unchanged sentences

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

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

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

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

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

balance sheets, as the Company writes off any accrued interest receivable balance to net investment income in a timely manner (after

90 days) when the Company has concerns regarding collectability.

Company does not calculate a credit loss allowance on accrued interest income, included in accrued investment income on the consolidated

balance sheets, as the Company writes off any accrued interest income to net investment income if the accrued but unpaid amount exceeds

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Quality Indicators

NAIC assigns designations to fixed maturity securities.

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

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

NAIC Class 1 and 2 are considered investment

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

Based on the NAIC designations, the Company

had 97.7 % and 98.2 % of its fixed maturity securities rated investment grade as of December 31, 2024 and 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.

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

on the NAIC securities designations, the Company had 98.5 % and 97.7 % of its fixed maturity securities rated investment grade as of December

31, 2025, and 2024, 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

$ 198,055,737

7 unchanged sentences

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

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

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

securities and

obligations of

public utilities

Ended December 31, 2025

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

securities including public utilities

Mortgage-backed

securities and

obligations of

public utilities

Beginning balance - December 31, 2024

for credit losses not previously recorded

in allowance on securities with previous allowance

for securities sold during the period

for securities with credit losses due to intent to sell

charged against the allowance

of amounts previously written off

Additions for credit losses

not previously recorded

Change in allowance on

securities with previous allowance

Reductions for securities

sold during the period

Reductions for securities

with credit losses due to intent to sell

Write-offs charged against

the allowance

Recoveries of amounts previously

Ending Balance - December 31, 2025

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

securities and

obligations of

public utilities

Ended December 31, 2024

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

securities including public utilities

Mortgage-backed

securities and

obligations of

public utilities

Beginning balance - December 31, 2023

for credit losses not previously recorded

in allowance on securities with previous allowance

for securities sold during the period

for securities with credit losses due to intent to sell

charged against the allowance

of amounts previously written off

Additions for credit losses

not previously recorded

Change in allowance on

securities with previous allowance

Reductions for securities

sold during the period

Reductions for securities

with credit losses due to intent to sell

Write-offs charged against

the allowance

Recoveries of amounts

previously written off

Ending Balance - December 31, 2024

1 unchanged sentence

2025, by contractual maturity.

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

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

Schedule of Investments Classified by Contractual Maturity Date

Expected maturities may differ from contractual maturities because certain securities afford the issuer

the right to call or prepay its obligations.

of Investments Classified by Contractual Maturity Date

Estimated Fair

8 unchanged sentences

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

Schedule of Major Categories of Net Investment Income

of Major Categories of Net Investment Income

Ended December 31,

Proceeds from

Proceeds from sales

Gross realized gains

1 unchanged sentence

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

on Deposit, Held in Trust, and Pledged as Collateral

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

Schedule of Assets on Deposit With Life Insurance

of Assets on Deposit with Life Insurance

Ended December 31,

Fixed maturity

securities available for sale at estimated fair value

Fixed maturity securities available

for sale at estimated fair value

Other investments

and cash equivalents

Cash and cash equivalents

assets on deposit

1 unchanged sentence

Ended December 31,

Fixed maturity

securities available for sale at estimated fair value

and cash equivalents

Fixed maturity securities available

for sale at estimated fair value

Cash and cash equivalents

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.

See Note 7 of the Notes to the

Consolidated Financial Statements for more information about the FHLB.

Company, through two of its life insurance subsidiaries, is a member of the Federal Home Loan Banks of Des Moines and Dallas (“FHLBs”).

Assets pledged as collateral with the FHLBs are presented below.

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

As of December 31, 2025, the Company owed nil to the FHLBs for advances.

The Company received $ 69,000,000 in advances and repaid $ 69,000,000

of these advances during the year ended December 31, 2025.

See Note 14 of the Notes to the Consolidated Financial Statements for more

information about the FHLB.

Ended December 31,

Fixed maturity

securities available for sale at estimated fair value

Fixed maturity securities available

for sale at estimated fair value

Total assets pledged as collateral

6 unchanged sentences

Real Estate Held for Investment and Held for Sale

Company owns and manages commercial real estate assets as a means of both generating investment income and providing workspace for its

These assets are acquired in accordance with the Company’s goals and objectives for risk-adjusted returns.

Due diligence

is conducted on each asset using internal and third-party resources.

The geographic locations and asset classes of investments are determined

by senior management under the direction of the Company’s Board of Directors.

Company owns, invests in and manages commercial real estate as a means of both generating investment income and providing workspace for

its employees.

This asset class is acquired in accordance with the Company’s goals and objectives for risk-adjusted returns.

diligence is conducted on each asset using internal and third-party resources.

The geographic locations and asset sub-classes of investments

are determined by senior management under the direction of the Company’s Board of Directors.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

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

surrounding markets.

The Company utilizes third party property managers where the geographic location does not warrant full-time staff

or through strategic lease-up periods.

The Company will generally acquire assets as a result of company acquisitions or that are in regions

expected to have high growth in employment and population and that provide operational efficiencies.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Company employs full-time employees to manage the day-to-day operations of its commercial real estate within the greater Salt Lake area

and close surrounding markets.

The Company utilizes third party property managers where the geographic location does not warrant full-time

staff or through strategic lease-up periods.

The Company generally acquires commercial real estate in connection with company acquisitions

or that are in regions expected to have high growth in employment and population and that provide operational efficiencies.

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

4 unchanged sentences

or asset class diversification.

aggregated net book value of commercial real estate serving as collateral for bank loans was $ 119,889,846 and $ 124,381,467 as of December

aggregate net book value of commercial real estate serving as collateral for bank loans was $ 114,683,175 and $ 119,889,846 as of December

31, 2025, and 2024, respectively.

9 unchanged sentences

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

Schedule of Commercial Real Estate Investment

of Commercial Real Estate Investment

Net Book Value

Total Square Footage

$ 121,240,268

4 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

2 unchanged sentences

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

Schedule of Annual Undiscounted Cash Flows of Operating Lease Payments

of Annual Undiscounted Cash flows of Operating Lease Payments

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

1 unchanged sentence

Mississippi (1)

(1) Consists of approximately

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 .

Consists of approximately 93 acres of undeveloped land.

Estate Owned and Occupied by the Company

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

As of December 31, 2025, 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

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) (3)

Life Insurance Operations

Included in real estate held for investment on the consolidated

balance sheets

Included in property and equipment on the consolidated balance

Listed for sale

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Real Estate Held for Investment and Held for Sale

2 unchanged sentences

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

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

SNRE cultivates

and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the Company’s entire

residential property portfolio.

The Company also looks for opportunities to acquire

land that can be developed into single family lots.

Once developed, finished lots are sold to builder partners and others.

2025 and 2024, the Company did not record any impairment losses on residential real estate held for investment or held for sale.

4 unchanged sentences

Depreciation is included in net investment income on the consolidated statements of earnings.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

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

Schedule of Residential Real Estate Investment

of Residential Real Estate Investment

Net Book Value

(1) Includes multiple

residential subdivision development projects, refer to the following table.

Includes multiple residential subdivision development projects,

refer to the following table.

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

Lots available

Lots available for sale

Lots to be developed

Ending Balance

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

1 unchanged sentence

net book value of foreclosed residential real estate included in residential real estate held for investment or sale was $ 1,270,669 and

nil as of December 31, 2024 and 2023, respectively.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

Estate Owned and Occupied by the Company

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

As of December 31, 2024, real

estate owned and occupied by the Company is summarized as follows:

Schedule of Real Estate Owned and Occupied by the Company

Business Segment

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,

Life Insurance Operations

812 Sheppard Street, Minden,

Life Insurance Sales

(1) Included in real

estate held for investment on the consolidated balance sheets

(2) Included in property

and equipment on the consolidated balance sheets

(3) Listed for sale

$ 1,126,480 as of December 31, 2025, and 2024, respectively.

Loans Held for Investment

1 unchanged sentence

Financial Statements.

loans held for investment consist of first and second mortgages and are generally classified into three distinct groups:

Residential, and Residential Construction.

These mortgage loans bear interest at rates ranging from 2.0 % to 10.5 %;

maturity dates range

from nine months to 30 years and the loans are secured by real estate have amortization periods of 0 to 30 years.

Concentrations

5 unchanged sentences

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

As of December 31, 2024, the Company had 56 %, 8 %, 9 % and 6 %

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

As of December 31, 2025, the Company had 57 %,

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

As of December

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.

31, 2024, the Company had 56 %,

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

of Allowance for Credit Losses

Note 1 regarding the adoption of ASU 2016-13.

allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage loans

16 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

When a mortgage loan becomes delinquent, the Company proceeds to foreclose, and all expenses of foreclosure are expensed as incurred.

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

When a mortgage loan becomes delinquent, the Company proceeds to foreclose.

Once foreclosed, the property is classified as real estate

held for investment or held for sale.

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

3 unchanged sentences

loan type as follows:

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

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

Commercial loans are made primarily based on the underlying collateral supporting the loan.

Accordingly, the repayment of

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

guarantor’s) ability to repay.

Accordingly, the repayment of a commercial

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

ability to repay.

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

9 unchanged sentences

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

The borrower’s ability to repay is

sensitive to life events and the general economic condition of the region.

Where loan to value exceeds 80%, the loan is generally guaranteed

by private mortgage insurance, the FHA, or VA.

The borrower’s ability to repay is sensitive

to life events and the general economic condition of the region.

Where LTV exceeds 80%, the loan is generally guaranteed by private mortgage

insurance, the FHA, or VA.

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

6 unchanged sentences

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

loan type, LTV, payment status, age, and current property values.

Analyzing the information from various sources allows the Company to

arrive at an allowance for credit losses.

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

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

9 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

As of December

31, 2025, the Company’s commitments were approximately $ 201,220,000 for these loans, of which $ 158,908,000 had been funded.

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

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

The Company receives fees and interest for these loans

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

Maturities range between six and eighteen months.

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.

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

The per loan basis point is reviewed

1 unchanged sentence

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

Schedule of Allowance for Loan Losses

of Allowance for Loan Losses

December 31, 2025

Allowance for credit losses:

Beginning balance - January 1, 2023

Adoption of ASU 2016-13

in provision for credit losses (2)

( 1,095,485 )

Beginning balance - December 31, 2024

Change in provision for

credit losses (1)

Ending balance - December 31, 2025

1 unchanged sentence

Allowance for credit losses:

Beginning balance - January 1, 2023

Adoption of ASU 2016-13

in provision for credit losses (2)

Beginning balance - December 31, 2023

Change in provision for

credit losses (1)

( 1,095,485 )

Ending balance - December 31, 2024

(1) See Note 1 of the

notes to the consolidated financial statements

(2) Included in other

expenses on the consolidated statements of earnings

Included in other expenses on the consolidated statements of

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

following table presents the aging of mortgage loans held for investment by loan type.

Schedule of Aging of Mortgage Loans

of Aging of Mortgage Loans

December 31, 2025

30-59 days past

60-89 days past due

Over 90 days past due (1)

of foreclosure (1)

process of foreclosure (1)

mortgage loans

1 unchanged sentence

( 1,368,121 )

( 2,588,918 )

Unamortized deferred loan

9 unchanged sentences

Over 90 days past due (1)

of foreclosure (1)

process of foreclosure (1)

mortgage loans

1 unchanged sentence

( 1,885,390 )

( 2,390,894 )

( 3,818,653 )

Unamortized deferred loan

5 unchanged sentences

$ 301,747,358

(1) Interest income

is not recognized on loans which are more than 90 days past due or in foreclosure.

Interest income is not recognized on loans which are more than

90 days past due or in foreclosure.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Quality Indicators

4 unchanged sentences

December 31, 2025:

Schedule of Commercial Mortgage Loans By Credit Quality Indicator

Quality Indicator

of commercial and Residential Mortgage Loans By Credit Quality Indicator

Credit Quality

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, 2024:

Credit Quality

Less than 65%

Greater than 80%

1.00x - 1.20x

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

4 unchanged sentences

December 31, 2025:

Quality Indicator

Credit Quality

Performance Indicators:

Non-performing (1)

(1) Includes residential

mortgage loans in the process of foreclosure of $ 3,942,392

Includes residential mortgage loans in the process of foreclosure

Less than 65%

Greater than 80%

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

December 31, 2024:

Credit Quality

Performance Indicators:

Non-performing (1)

Includes residential mortgage loans in the process of foreclosure

of $ 3,942,392

Less than 65%

Greater than 80%

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

company evaluates and monitors the credit quality of its residential construction loans (including land acquisition and development loans)

4 unchanged sentences

follows as of December 31, 2025:

Schedule of Residential Construction Mortgage Loans

Quality Indicator

of Residential Construction Mortgage Loans

Credit Quality

Performance Indicators:

$ 105,516,880

7 unchanged sentences

$ 157,398,705

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

follows as of December 31, 2024:

Credit Quality

Performance Indicators:

$ 118,863,944

$ 151,172,733

Non-performing

$ 118,863,944

$ 151,172,733

Less than 65%

Greater than 80%

$ 118,863,944

$ 151,172,733

following table presents the amortized cost and contractual payments on mortgage loans held for investment by category as of December

1 unchanged sentence

obligations with or without early payment penalties.

Schedule of Mortgage loans Held for Investment

of Mortgage loans Held for Investment

Residential Construction

2 unchanged sentences

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

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

Schedule of Aging of Insurance Assignments

of Aging of Insurance Assignments

Ended December 31,

30-59 days past

30-59 days past due

60-89 days past due

insurance assignments

for credit losses

Over 90 days past due

Total past due

Total insurance assignments

Allowance for credit losses

( 1,676,468 )

( 1,536,926 )

insurance assignments

Net insurance assignments

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

Once an insurance assignment moves to 90 days

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

See Note 1 regarding the adoption of ASU 2016-13.

Once an insurance assignment is 90 days past

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

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

Schedule of Allowance for Credit Losses

Beginning balance - January 1, 2024

in provision for credit losses (1)

( 1,050,187 )

of Allowance for Credit Losses

Beginning balance - December 31, 2024

Change in provision for

credit losses (1)

Ending balance - December 31, 2025

Beginning balance - January 1, 2023

in provision for credit losses (1)

Beginning balance - December 31, 2023

Change in provision for

credit losses (1)

( 1,050,187 )

Ending balance - December 31, 2024

(1) Included in other

expenses on the consolidated statements of earnings

Included in other expenses on the consolidated statements of

NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

2) Investments

Interest Entities (“VIE”)

Company has a 50 % ownership interest in three VIEs:

HHH Real Estate LLC (“HHH”), SN Oquirrh LLC (“Oquirrh”),

and SN Towns LLC (“Towns”).

These entities hold and develop single family lots for residential construction.

In accordance

with the operating agreements for these entities, net profits or losses are allocated to the members in accordance with their ownership

The investments in HHH, Oquirrh and Towns are accounted for under the equity method of accounting.

The carrying value of the

equity investment in HHH was $ 10,530,515 and nil at December 31, 2025, and 2024, respectively, which is included in other investments

and policy loans on the consolidated balance sheets.

The carrying value of the equity investment in Oquirrh was $ 887,532 and $ 1,500,000

at December 31, 2025, and 2024, respectively, which is included in other investments and policy loans on the consolidated balance sheets.

The carrying value of the equity investment in Towns was $ 2,656,616 and $ 4,063,537 at December 31, 2025, and 2024, respectively.

and $ 1,939,269 of which at December 31, 2025, and 2024, respectively, is included in restricted assets and $ 1,189,558 and $ 2,124,268

of which at December 31, 2025, and 2024, respectively, is included in cemetery perpetual care trust investments on the consolidated balance

Company has determined that HHH, Oquirrh and Towns are VIEs for which the Company is not the primary beneficiary for the following reasons:

(1) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest, (2) the General Manager directs

the activities and legal operations that most significantly affect the entity’s economic performance and (3) the Company does not

have majority voting rights and no power to unilaterally direct the activities of the entity, and therefore, is not the primary beneficiary.

The Company’s exposure to loss because of its involvement with the equity method investees is limited to the carrying value of

the Company’s investments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Investments (Continued)

Related Earnings

1 unchanged sentence

from investments and other assets.

Schedule of Gain (Loss) on Investments

Ended December 31

Fixed maturity securities

available for sale:

realized gains

realized losses

loss (provision) release

of Gain (Loss) on Investments

Years Ended December 31

Fixed maturity securities available for sale:

Gross realized gains

Gross realized losses

Net credit loss provision

Equity securities:

Losses on securities sold

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

Mortgage loans held for

realized gains

realized losses

Unrealized gains on securities held at the end of the period

Mortgage loans held for investment:

Gross realized gains

Gross realized losses

( 1,161,363 )

Real estate held for investment

realized gains

realized losses

Other assets, including

call and put option derivatives:

realized gains

realized losses

Real estate held for investment and sale:

Gross realized gains

Gross realized losses

Other investments and assets:

Gross realized gains

Gross realized losses

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

using the specific identification method.

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

and mortuaries of $ 888,788 in net gains and $ 730,259 in net losses for 2024 and 2023, respectively.

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

and mortuaries and totaled $ 1,352,331 in net gains and $ 888,788 in net gains for 2025 and 2024, respectively.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Investments (Continued)

categories of net investment income were as follows:

Ended December 31

Fixed maturity

securities available for sale

Years Ended December 31

Fixed maturity securities available for sale

Equity securities

Mortgage loans held for investment

Real estate held for investment

Real estate held for investment and sale

Insurance assignments

Other investments

and cash equivalents

Cash and cash equivalents

Gross investment income

Investment expenses

( 18,807,736 )

( 16,034,968 )

investment income

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

mortuaries of $ 2,009,719 and $ 2,365,378 for 2024 and 2023, respectively.

Net investment income

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

mortuaries and totaled $ 953,785 and $ 2,009,719 for 2025, and 2024, respectively.

investment income on real estate consists primarily of rental revenue.

3 unchanged sentences

investment income consists of the following:

Schedule of Accrued Investment Income

Ended December 31,

Fixed maturity

securities available for sale

of Accrued Investment Income

Years Ended December 31,

Fixed maturity securities available for sale

Equity securities

1 unchanged sentence

Real estate held for investment

and cash equivalents

accrued investment income

Other investments

Cash and cash equivalents

Total accrued investment income

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Loans Held for Sale

Held for Sale

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

3 unchanged sentences

policy on recognition of mortgage loan interest income and is included in mortgage fee income on the consolidated statement of earnings.

Included in loans held for sale are loans in the process of foreclosure with an aggregate unpaid principal balance of nil and $ 1,636,090

as of December 31, 2024 and 2023, respectively.

See Note 17 of the Notes to Consolidated Financial Statements for additional disclosures

regarding loans held for sale.

See Note 21 of the Notes to Consolidated Financial Statements for additional disclosures regarding loans held for sale.

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

4 unchanged sentences

Unpaid principal balance

Unrealized gain (loss)

Unrealized gain

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

2 unchanged sentences

of Mortgage Fee Income for Loans Held for Sale

Ended December 31

Years Ended December 31

Interest income

Secondary gains

Change in fair value of loan

Change in fair value of loan commitments

Change in fair value of loans held for sale

Provision for loan loss reserve

Mortgage fee income

$ 108,209,319

Change in fair value of loans

held for sale

for loan loss reserve

$ 107,558,640

2 unchanged sentences

Ended December 31, 2025 and 2024

Loans Held for Sale (Continued)

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

is captured so that an estimated future loss can be calculated.

Held for Sale (Continued)

demands (“demand(s)”) from third party investors for mortgage loans previously held for sale and sold are reviewed, and relevant

data is captured so that an estimated future loss can be calculated.

The key factors that are used in the estimated future loss calculation

5 unchanged sentences

these key factors.

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

In many instances, the Company can resolve

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

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

In many instances, the Company can resolve the issues

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

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

2 unchanged sentences

Provision for current loan originations (1)

Charge-offs, net of recaptured

Additional provision (2)

Charge-offs, net of recaptured amounts

( 1,157,960 )

Ending Balance

(1) Included in Mortgage

fee income on the consolidated statements of earnings

Included in Mortgage fee income on the consolidated statements

Included in other expenses

Company maintains reserves for estimated losses on current production volumes.

1 unchanged sentence

3.5 basis points per loan, the equivalent of $ 350 per $ 1,000,000 in loans originated.

This is a decrease over 2023, when $ 27,164 in reserves

were added at a rate of 4.3 basis points per loan originated, the equivalent of $ 430 per $ 1,000,000 in loans originated.

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 2024, when $ 932,154 in

reserves were added at a rate of 4.1 basis points per loan originated, the equivalent of $ 410 per $ 1,000,000 in loans originated.

Company monitors market data and trends and economic conditions (including forecasts) and uses its own experience to determine adequate

loss reserves on current production.

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

consist of the following:

Schedule of Receivable

of Receivable

Contracts with customers

Receivables from sales agents

Insurance premiums due

Total receivables

4 unchanged sentences

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

See Note 1 regarding the adoption of ASU

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

of Allowance Credit Losses

Beginning balance - January 1, 2024

Change in provision for

credit losses (1)

Beginning balance - December 31, 2024

Change in provision for credit losses (1)

Ending balance - December 31, 2025

Beginning balance - January 1, 2023

Change in provision for

credit losses (1)

Beginning balance - December 31, 2023

Change in provision for credit losses (1)

Ending balance - December 31, 2024

( 1) Included

in other expenses on the consolidated statements of earning s

Included in other expenses on the consolidated statements of

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Value of Business Acquired, Goodwill and Other Intangible Assets

regarding the value of business acquired was as follows:

Schedule of Value of Business Acquired

at beginning of year

Value of business acquired

Imputed interest at 7 % included in earnings

Amortization included in earnings

( 1,466,527 )(1)

( 1,926,668 )(1)

Shadow amortization

included in other

comprehensive income

Net amortization

( 1,336,123 )

Balance at end of

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

on the consolidated statements of earnings

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

Schedule of Acquisitions Net Amortization Charged to Income

amortization may vary based on changes in assumptions or experience.

As of December 31, 2024, value of business acquired is being amortized

over a weighted average life of 6.1 years.

with Customers

Company reports revenues from contracts with customers pursuant to ASC No.

606, Revenue from Contracts with Customers.

about Performance Obligations and Contract Balances

Company’s cemetery and mortuary segment sells a variety of goods and services to customers in both at-need and pre-need situations.

Due to the timing of the fulfillment of the obligation, revenue is deferred until that obligation is fulfilled.

The total contract liability

for future obligations is included in deferred pre-need cemetery and mortuary contract revenues on the consolidated balance sheets and,

as of December 31, 2025 and 2024, the balances were $ 22,991,603 and $ 20,168,405 , respectively.

Company’s two types of future obligations are as follows:

Merchandise and Service Revenue :

All pre-need merchandise and service revenue are deferred, and the funds are placed in trust

until the need arises;

the merchandise is received, or the service is performed.

The trust is then relieved, and the revenue and commissions

are recognized.

Pre-need contracts are required to be paid in full prior to a customer using a good or service from a pre-need contract.

Goods and services from pre-need contracts can be transferred when paid in full from one owner to another.

In such cases, the Company

will act as an agent in transferring the requested goods and services.

The transfer of goods and services does not fulfill the contract

and revenue remains deferred.

As of December 31, 2025 and 2024, the balances were $ 22,177,345 and $ 19,511,868 , respectively.

Specialty Merchandise Revenue :

At-need specialty merchandise revenue consists of customizable merchandise ordered from manufacturers

such as markers and bases.

When specialty merchandise is ordered, it can take time to manufacture and deliver the product.

deferred until the at-need merchandise is received.

As of December 31, 2025 and 2024, the balances were $ 814,258 and $ 656,537 , respectively.

Deferred revenue for at-need specialty revenue is not placed in trust.

payment does not constitute fulfillment of the contract.

Goods or services are deferred until such a time the service is performed, or

merchandise is received.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

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

regarding goodwill by segment was as follows:

Schedule of Goodwill by Segment

Balance at January 1, 2023:

Accumulated impairment

Total goodwill, net

Balance at December 31, 2023:

Accumulated impairment

Total goodwill, net

Balance at December 31, 2024:

Accumulated impairment

goodwill, net

is not amortized but is tested annually for impairment.

The annual impairment tests resulted in no impairment of goodwill for 2024 and

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 (12/31/2024)

Closing (12/31/2025)

Increase/(decrease)

Receivables (1)

Contract Asset

Contract Liability

Opening (12/31/2023)

Closing (12/31/2024)

Increase/(decrease)

Included in Receivables, net on the consolidated balance sheets

following table disaggregates the opening and closing balances of the Company’s contract balances.

Schedule of Opening and Closing Balances of the Assets and Liabilities

Contract Balances

Contract Asset

Contract Liability

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Opening (12/31/2024)

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Closing (12/31/2025)

Contract Balances

Contract Asset

Contract Liability

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Opening (12/31/2023)

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Closing (12/31/2024)

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

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

carrying value of the Company’s other intangible assets were as follows, which are included in other assets on the consolidated

balance sheets:

Schedule of Carrying Value of Intangible Asset

Intangible asset - trade name

Intangible assets - other (1)

Intangible asset - trade name (2)

Intangible asset - customer lists (2)

Less accumulated amortization

( 1,131,333 )

Balance at end of

(1) Cemetery/Mortuary Segment

(2) Life Insurance

expense for 2024 and 2023 was $ 324,000 and $ 254,000 , respectively, and is amortized over the estimated useful life using the straight-line

Amortization expense is included in other expenses on the consolidated statements of earnings.

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

Schedule of Estimate of Future Amortization for Other Intangible

amount of revenue recognized for 2025, and 2024 that was included in the opening contract liability balance was $ 4,806,347 and $ 5,324,668 ,

respectively.

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

from the timing difference between the Company’s performance and the customer’s payment.

Disaggregation

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

of Revenues of the Cemetery and Mortuary Contracts

Years Ended December 31

Major goods/service lines

Net mortuary and cemetery

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred at a point in time

Net mortuary and cemetery

Judgments and Estimates

Company’s cemetery and mortuary segment recognizes revenue on future performance obligations when goods are delivered and when

services are performed and is not determined by the terms or payments of the contract as long as any good or service is paid in full

prior to delivery.

Prices are determined based on the market at the time a contract is created.

Goods or services are not partially completed.

There are no significant judgements, estimations, or allocation methods for when revenue should be recognized.

Company has not elected to use any of the practical expedients.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Property and Equipment

and equipment is summarized below:

Schedule of Property and Equipment

Land and buildings

Furniture and equipment

Property and equipment, gross

Less accumulated depreciation

( 14,146,001 )

( 13,707,781 )

expense for 2024 and 2023 was $ 2,383,621 and $ 2,351,661 , respectively.

Property and equipment are stated at cost and are depreciated

over their estimated useful lives, primarily using the straight-line method.

The Company recognized an impairment loss of $ 122,229 in

2023 on a property held by the life segment.

This property was sold in 2024.

Impairment losses are included in gains (losses) on the

consolidated statements of earnings.

Bank and Other Loans Payable

and other loans payable are summarized as follows:

Summary of Bank Loans Payable

Total bank and other loans

3.85 % fixed note payable in monthly

installments of $ 243,781 including principal and interest, collateralized by real property with a book value of approximately $ 60,420,000 ,

due June 2032.

3.30 % fixed note payable in monthly installments

of $ 179,562 including principal and interest, collateralized by real property with a book value of approximately $ 42,230,000 , due

4.7865 % fixed interest only note payable in

monthly installments, collateralized by real property with a book value of approximately $ 16,240,000 , due June 2028.

1 month SOFR rate plus 2 % loan purchase agreement

with a warehouse line availability of $ 100,000,000 , expired November 2024 and is no longer needed by the Company.

1 month SOFR rate plus 2.0 % loan purchase agreement

with a warehouse line availability of $ 25,000,000 , matures August 2025.

1 month SOFR rate plus 2.1 % loan purchase agreement

with a warehouse line availability of $ 15,000,000 , matures June 2025.

Finance lease liabilities

Total bank and other loans

Less current installments

( 12,559,420 )

( 9,543,052 )

Bank and other loans,

excluding current installments

Company’s cemetery and mortuary segment defer certain costs associated with obtaining a contract on future obligations.

Merchandise and Service Revenue :

Pre-need merchandise and service revenues are deferred until the goods or services are delivered.

Recognition can be years until the obligations are satisfied.

Commissions and other costs are capitalized and deferred until the obligation

is satisfied.

Other costs include rent on pre-need offices and training rooms, and call center costs.

Costs that are allocated based

on a percentage include family service advisor compensation, bonuses, utilities, and supplies that are all used to procure a pre-need

Specialty Merchandise Revenue :

At-need specialty merchandise is ordered from a third-party manufacturer.

Generally, at-need specialty

merchandise is ordered and received within 90 days of order.

These orders are also short-term in nature and are deferred until the product

is received from the manufacturer and the obligation is satisfied.

following table disaggregates contract costs that are included in the deferred policy and pre-need contract acquisition costs on the

consolidated balances sheets.

of Reconciliation of Revenues from Cemetery and mortuary contracts to Business Segment Information

Years Ended December 31

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Deferred policy and pre-need

contract acquisition costs

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Bank and Other Loans Payable (Continued)

Home Loan Bank Membership

Federal Home Loan Banks (“the FHLBs”) are a group of cooperatives that lending institutions use to finance housing and economic

development in local communities.

The Company is a member of the FHLB based in Des Moines, Iowa and based in Dallas, Texas.

of the FHLB, the Company is required to maintain a minimum investment in capital stock of the FHLB and may pledge collateral to the bank

for advances of funds to be used in its operations.

Home Loan Bank of Des Moines

of December 31, 2024, the amount available for borrowings from the FHLB of Des Moines was approximately $ 41,235,894 , compared with $ 77,324,238

as of December 31, 2023.

United States Treasury fixed maturity securities with an estimated fair value of $ 54,487,812 as of December

31, 2024 have been pledged at the FHLB of Des Moines as collateral for current and potential borrowings compared with $ 88,400,026 at

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

its pre-need sales for its cemetery and mortuary segment.

cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds

held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development

Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included

this amount as a component of restricted cash.

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

assets as of December 31, 2025 are summarized as follows:

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

December 31, 2025:

As of December 31, 2024 and 2023, the Company had no outstanding FHLB borrowings.

As of December 31, 2024, the Company’s

total investment in FHLB stock was $ 479,100 compared with $ 453,600 as of December 31, 2023.

As of December 31, 2024, the Company was

contingently liable under standby letters of credit aggregating $ 9,670,307 .

These letters of credit are to be used to cover any contingency

related to additional risk assessments pertaining to the Company’s captive insurance program for $ 443,758 and for bonding of residential

land development for $ 9,226,549 .

Home Loan Bank of Dallas

of December 31, 2024, the amount available for borrowings from the FHLB of Dallas was approximately $ 8,342,442 , compared with $ 5,104,610

as of December 31, 2023.

Mortgage-Backed fixed maturity securities with an estimated fair value of $ 9,312,642 as of December 31, 2024

have been pledged at the FHLB of Dallas as collateral for current and potential borrowings compared with $ 5,503,063 at December 31, 2023.

As of December 31, 2024 and 2023, the Company had no outstanding FHLB borrowings.

As of December 31, 2024, the Company’s total

investment in FHLB stock was $ 1,925,800 compared with $ 1,826,200 as of December 31, 2023.

Lines of Credit

Company has a $ 5,000,000 revolving line-of-credit with a bank with interest payable at the Prime rate plus 0.75 % with a 3 % prime floor,

secured by the capital stock of Security National Life and maturing May 15, 2025 , renewable annually.

As of December 31, 2024, the Company

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

development and $ 1,250,000 , to be used as collateral for SecurityNational Mortgage’s state licensing.

The standby letters of credit

will draw on the line of credit if necessary.

The Company does not expect any material losses to result from the issuance of the standby

letters of credit.

As of December 31, 2024, there were no amounts outstanding under the revolving line-of-credit.

Covenants for Mortgage Warehouse Lines of Credit

Company, through its subsidiary SecurityNational Mortgage, has two lines of credit for the purpose of funding mortgage loans.

Company’s agreement with U.S.

Bank allows SecurityNational Mortgage to borrow up to $ 15,000,000 .

The agreement charges interest

at 2.10% plus the greater of (i) 0% , and (ii) the one-month forward-looking term rate based on SOFR and matures on June 20, 2025 .

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

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Bank and Other Loans Payable (Continued)

Company’s agreement with Western Alliance Bank allows SecurityNational Mortgage to borrow up to $ 25,000,000 .

The agreement charges

interest at the 1-Month SOFR rate plus 2.0% and matures on August 27, 2025 .

The Company is required to comply with covenants for adjusted

tangible net worth, unrestricted cash balance, and minimum combined pre-tax income of at least $ 1.00 on a quarterly basis.

agreements for both 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 December 31, 2024, SecurityNational

Mortgage was not in compliance with the net income covenants under its 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

from the warehouse banks.

In the unlikely event SecurityNational Mortgage is required to repay the outstanding advances of approximately

$ 10,587,449 on the warehouse line of credit that has not provided a covenant waiver, SecurityNational Mortgage has sufficient cash and

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

has done an internal analysis of the 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.

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 current business model.

The Company continues to negotiate other warehouse lines of credit with other

Covenants for Revolving Lines of Credit and Bank Loans

Company also 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.

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

following tabulation shows the combined maturities of bank and other loans payable:

Schedule of Combined Maturities of Bank Loans Payable Lines of Credit and Notes and Contracts Payable

$ 106,740,104

expense in 2024 and 2023 was $ 4,254,100 and $ 4,865,327 , respectively.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

Perpetual Care Trust Investments and Obligation

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

rights for cemeteries that have established an endowment care trust.

These endowment care trusts are defined as Variable Interest Entities

pursuant to GAAP.

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

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

Care Obligation in the accompanying consolidated balance sheets .

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

of Investments and Obligation

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

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

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

fixed maturity securities available for sale

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

Industrial, miscellaneous and all other

$ ( 344,319 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 344,319 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

Residential construction

Allowance for

credit losses

Allowance for credit losses

Total mortgage loans

held for investment

Total mortgage loans held for investment

Other investments

Cash and cash equivalents (1)

Accrued investment income

Total cemetery perpetual

care trust investments

Cemetery perpetual

care obligation

$ ( 5,642,693 )

Trust investments

in excess of trust obligations

Total restricted assets

Including cash and cash equivalents of $ 8,383,847 for the life insurance and mortgage segments.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

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

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

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Assets (Continued)

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

December 31, 2024:

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and

political subdivisions

securities including public utilities

fixed maturity securities available for sale

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

Industrial, miscellaneous and all other

$ ( 489,852 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 489,852 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

Residential construction

Allowance for credit losses

Total mortgage loans

held for investment

Total mortgage loans held for investment

Other investments

Cash and cash equivalents (1)

Total cemetery perpetual

care trust investments

Cemetery perpetual

care obligation

$ ( 5,326,196 )

Trust investments

in excess of trust obligations

Accrued investment income

Total restricted assets

Including cash and cash equivalents of $ 7,657,958 for the life

insurance and mortgage segments.

surplus note receivable in the amount of $ 4,000,000 at December 31, 2025 and 2024, from Security National Life, was eliminated in consolidation.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Assets (Continued)

Maturity Securities

5 unchanged sentences

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

At December 31, 2025

Treasury securities and obligations

Government agencies

Obligations of states

and political subdivisions

Obligations of states and political subdivisions

Corporate securities including public utilities

Total unrealized losses

At December 31, 2024

Treasury securities and obligations of

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including

public utilities

Corporate securities including public utilities

Total unrealized losses

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

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

holdings were comprised of four securities with fair values aggregating 99.1 % of aggregate amortized cost as of December 31, 2024.

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

No credit losses have been

recognized for 2024 and 2023, since the increase in unrealized losses is primarily a result of increases in interest rates.

2 for additional information regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities

available for sale.

holdings were comprised of two securities with fair values aggregating 99.4 % of aggregate amortized cost as of December 31, 2025 compared

to 15 securities with fair values aggregating of 99.2 % of aggregate amortized cost at December 31, 2024.

No credit losses have been recognized

for 2025, and 2024, since the unrealized losses are primarily a result of increases in interest rates.

See Note 2 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 December 31, 2025,

2 unchanged sentences

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual Maturity Date

of Investments Classified by Contractual Maturity Date

Estimated Fair

3 unchanged sentences

Due in more than 10 years

Notes 1, 2 and 21 for additional information regarding restricted assets.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

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

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

with its pre-need sales for its cemetery and mortuary segment.

cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds

held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development

Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included

this amount as a component of restricted cash.

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

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

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

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

securities and obligations of U.S.

Perpetual Care Trust Investments and Obligation

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

rights for cemeteries that have established an endowment care trust.

These endowment care trusts are defined as Variable Interest Entities

pursuant to GAAP.

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

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

Care Obligation in the accompanying consolidated balance sheets .

components of cemetery perpetual care investments and obligation as of December 31, 2025 are as follows:

of Investments and Obligation

December 31, 2025:

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and

political subdivisions

securities including public utilities

fixed maturity securities available for sale

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

Industrial, miscellaneous and all other

$ ( 169,485 )

equity securities at estimated fair value

Total equity securities at estimated fair value

$ ( 169,485 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

Residential construction

Allowance for credit losses

Total mortgage loans

held for investment

Other investments

Total mortgage loans held for investment

Cash and cash equivalents

Other investements

Accrued investment income

Total restricted

(1) Including cash and cash equivalents

of $ 7,657,958 for the life insurance and mortgage segments.

Total cemetery perpetual care trust investments

Cemetery perpetual care obligation

$ ( 5,918,776 )

Trust investments in excess of trust obligations

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

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

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

Unrealized Gains

Unrealized Losses

Fixed maturity securities, available for sale,

at estimated fair value:

Treasury securities and obligations

Perpetual Care Trust Investments and Obligation (Continued)

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

December 31, 2024:

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

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including

public utilities

Total fixed maturity

securities available for sale

Total fixed maturity securities available for sale

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous

and all other

Industrial, miscellaneous and all other

$ ( 226,007 )

Total equity securities

at estimated fair value

Total equity securities at estimated fair value

$ ( 226,007 )

Mortgage loans held for investment at amortized

Mortgage loans held for investment at amortized cost:

Residential construction

Allowance for

credit losses

Total mortgage loans

held for investment

Allowance for credit losses

Total mortgage loans held for investment

Cash and cash equivalents

Total restricted

(1) Including cash and cash equivalents

of $ 6,930,933 for the life insurance and mortgage segments.

surplus note receivable in the amount of $ 4,000,000 at December 31, 2024 and 2023, from Security National Life, was eliminated in consolidation.

Accrued investment income

Total cemetery perpetual care trust investments

Cemetery perpetual care obligation

$ ( 5,642,693 )

Trust investments in excess of trust obligations

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Perpetual Care Trust Investments and Obligation (Continued)

Maturity Securities

4 unchanged sentences

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

of Fair Value of Fixed Maturity Securities

At December 31, 2025

Treasury securities and obligations

Government agencies

Obligations of states and political subdivisions

Corporate securities including

public utilities

Total unrealized losses

At December 31, 2024

Treasury securities and obligations of

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including

public utilities

Total unrealized losses

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

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

holdings were comprised of 15 securities with fair values aggregating 99.2 % of aggregate amortized cost as of December 31, 2024.

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

losses have been recognized for 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.

holdings were comprised of two securities with fair values aggregating 97.5 % of aggregate amortized cost as of December 31, 2025 compared

to four securities with fair values aggregating 99.1 % of aggregate amortized cost as of December 31, 2024.

No credit losses have been

recognized for 2025, and 2024, since the unrealized losses are primarily the result of increases in interest rates.

See Note 2 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 December 31, 2025,

2 unchanged sentences

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual Maturity Date

of Investments Classified by Contractual Maturity Date

Estimated Fair

3 unchanged sentences

Due in more than 10 years

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

Notes 1, 2 and 21 for additional information regarding cemetery perpetual care trust investments.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Servicing Rights

Company reports MSRs pursuant to the accounting policy discussed in Note 1.

following table presents the MSR activity.

of Mortgage Servicing Rights

Amortized cost:

Balance before valuation allowance at beginning of year

MSR additions resulting from loan sales

Amortization (1)

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

Balance before valuation allowance at year end

Valuation allowance for impairment of MSRs:

Balance at beginning of year

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

Balance at year end

Mortgage servicing rights, net

Estimated fair value of MSRs at year end

Included in other expenses on the consolidated statements of

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 for the December 31, 2025, 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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Servicing Rights (Continued)

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

statements of earnings.

of Other Revenues

Years Ended December 31,

Contractual servicing fees

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

of Unpaid Principal Balances of the Servicing Portfolio

Servicing UPB

$ 361,632,543

$ 385,134,774

following key assumptions were used in determining MSR value.

of Assumptions Used in Determining MSR Value

December 31, 2025

December 31, 2024

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

and Equipment

and equipment is summarized below:

Schedule of Property and Equipment

Land and buildings

Furniture and equipment

Property and equipment, gross

Less accumulated depreciation

( 14,781,486 )

( 14,146,001 )

expense for 2025 and 2024 was $ 2,425,185

and $ 2,383,621 ,

respectively.

Property and equipment are stated at cost and are depreciated over their estimated useful lives, primarily using the

straight-line method.

The Company did not record any impairment losses on property and equipment for 2025 or 2024.

losses, if any, are included in gains (losses) on investments and other assets on the consolidated statements of

Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired, and Unearned Premium Reserve

Policy and Pre-need Contract Acquisition Costs (“DAC”)

Company reports DAC pursuant to the accounting policy discussed in Note 1.

Also, refer to Note 1 regarding the adoption of ASU 2018-12.

following tables show a roll forward for the lines of business that contain DAC balances, along with a reconciliation to the Company’s

total DAC balance:

of Roll Forward for the Lines of Business that Contain DAC Balances

Year Ended December 31, 2025

Balance, beginning of period

$ 118,803,677

$ 127,219,907

( 9,992,783 )

( 11,167,373 )

Balance, end of period

$ 127,639,286

$ 135,978,803

Year Ended December 31, 2024

Balance, beginning of period

$ 107,480,923

$ 116,354,598

( 8,887,646 )

( 10,477,722 )

Balance, end of period

$ 118,803,677

$ 127,219,907

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired, and Unearned Premium Reserve (Continued)

of Business Acquired (“VOBA”)

Company reports VOBA pursuant to the accounting policy discussed in Note 1.

Also, refer to Note 1 regarding the adoption of ASU 2018-12.

following tables show a roll forward for the lines of business that contain VOBA balances, along with a reconciliation to the Company’s

total VOBA balance:

of Roll Forward for the Lines of Business That Contain VOBA Balances

Year Ended December 31, 2025

Balance, beginning of period

Balance, end of period

Year Ended December 31, 2024

Balance, beginning of period

Balance, end of period

no additional acquisitions, amortization expense is expected to approximate the following:

Schedule of Amortization Expense is Expected

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired, and Unearned Premium Reserve (Continued)

Premium Reserve

Company reports unearned premium reserve pursuant to the accounting policy discussed in Note 1.

Also, refer to Note 1 regarding the adoption

of ASU 2018-12.

balance and the changes in Unearned Premium Reserve are as follows:

of Balance and the Changes in Unearned Premium Reserve

December 31, 2025

December 31, 2024

Universal Life

Balance, beginning of year

Amortization (1)

Unearned premium reserve, end of period

Included in premiums and other considerations on the consolidated

statements of earnings.

and Other Intangible Assets

regarding goodwill by segment was as follows:

Schedule of Goodwill by Segment

Life Insurance

Cemetery/ Mortuary

Balance at December 31, 2023:

Accumulated impairment

Total goodwill, net

Balance at December 31, 2024:

Accumulated impairment

Total goodwill, net

Balance at December 31, 2025:

Accumulated impairment

Total goodwill, net

is not amortized but is tested annually for impairment.

The annual impairment tests resulted in no impairment of goodwill for 2025 and

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

and Other Intangible Assets (Continued)

carrying value of the Company’s other intangible assets were as follows, which are included in other assets on the consolidated

balance sheets:

Schedule of Carrying Value of Intangible Asset

Intangible asset - trade name (1)

Intangible assets - other (1)

Intangible asset - trade name (2)

Intangible asset - customer lists (2)

Less accumulated amortization

( 1,478,666 )

( 1,131,333 )

Balance at end of year

Cemetery/Mortuary Segment

Life Insurance Segment

expense for 2025 and 2024 was $ 347,333 and $ 324,000 , respectively, and is amortized over the estimated useful life using the straight-line

Amortization expense is included in other expenses on the consolidated statements of earnings.

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

Schedule of Estimate of Future Amortization for Other Intangible

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Company reports derivative instruments pursuant to the accounting policy discussed in Note 1.

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

Schedule of Derivative Assets at Fair Value

December 31, 2025

December 31, 2024

Derivatives not designated as hedging instruments:

Loan commitments

Other assets and Other liabilities

$ 132,887,592

$ 210,597,657

$ 132,887,592

$ 210,597,657

following table presents the gains (losses) on derivatives.

There were no gains or losses reclassified from accumulated other comprehensive

income into income, or gains or losses recognized into income on the ineffective portion of the derivatives or any amounts excluded from

effective testing.

Schedule of Gains and Losses on Derivatives

Years ended December 31,

Classification

Loan commitments

Mortgage fee income

$ ( 833,073 )

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy Benefits and Unpaid Claims

Company reports future policy benefits and unpaid claims pursuant to the accounting policy discussed in Note 1.

Also, refer to Note 1

regarding the adoption of ASU 2018-12.

The Company establishes liabilities for amounts payable under insurance policies.

These liabilities

are comprised of traditional and limited-payment contracts and associated deferred profit liabilities, unpaid claims, and additional

insurance liabilities.

following table provides a reconciliation of future policy benefits and unpaid claims and the related receivable from reinsurers to the

consolidated balance sheets.

Schedule of Liability for Future Policy Benefits, by Product Segment

Traditional and limited-payment life

$ 581,389,399

$ 547,984,488

Deferred profit liability - traditional and limited-payment life

Payout annuities

Accident and health

Other policyholder funds

Reported but unpaid claims

Incurred but not reported claims

Gross future policy benefits and unpaid claims

$ 799,706,946

$ 752,080,658

Receivable from reinsurers

Traditional and limited pay life

Deferred profit liability - traditional and limited-payment life

Accident and health

Reported but unpaid claims

Incurred but not reported claims

Total receivable from reinsurers

Net future policy benefits and unpaid claims

$ 789,326,820

$ 741,679,639

Net unpaid claims

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy Benefits and Unpaid Claims (Continued)

and Limited-Payment Life

following table summarizes the balances of and changes in the liability for future policy benefits for traditional and limited-payment

of Balances of and Changes in the Liability for Future Policy Benefits

Present Value of Expected Net Premiums:

Balance, beginning of year

$ 252,828,338

$ 261,319,018

Beginning balance at original discount rate

Effect of changes in cash flow assumptions

Effect of actual variances from expected experience (1)

( 19,082,021 )

( 14,132,236 )

Adjusted beginning of year balance

Interest accrual

Net premiums collected (2)

( 51,872,527 )

( 53,220,587 )

Ending balance at original discount rate

Effect of changes in discount rate assumptions

( 5,961,873 )

Balance, end of period

$ 250,450,302

$ 252,828,338

Present Value of Expected Future Policy Benefits:

Balance, beginning of year

$ 800,812,826

$ 833,621,080

Beginning balance at original discount rate

Effect of changes in cash flow assumptions

Effect of actual variances from expected experience (1)

( 15,224,887 )

( 12,409,158 )

Adjusted beginning of year balance

Interest accrual

Benefit payments

( 68,140,720 )

( 64,045,830 )

Ending balance at original discount rate

Effect of changes in discount rate assumptions

( 35,337,817 )

( 57,704,107 )

Balance, end of period

$ 831,839,700

$ 800,812,826

Net liability for future policy benefits, pre-flooring

$ 581,309,175

$ 547,983,396

Flooring impact, end of period

Net liability for future policy benefits, post-flooring

Receivable from reinsurers

Net liability for future policy benefits, after reinsurance

$ 572,202,416

$ 538,731,504

For the years ended December 31, 2025, and 2024, the net effect

of actual variances from expected experience was primarily due to lapses.

Actual mortality and surrenders were close to expected.

Net premiums collected represent the portion of gross premiums

collected from policyholders that is used to fund expected benefit payments.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy Benefits and Unpaid Claims (Continued)

following table summarizes the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for

traditional and limited-payment life:

of Amount of Undiscounted and Discounted Expected Gross Premiums and Expected Future Benefit Payments

Undiscounted expected future benefit payments

$ 1,929,788,387

$ 1,924,273,198

Discounted expected future benefit payments (at original discount rate)

Discounted expected future benefit payments (at current discount rate)

Undiscounted expected future gross premiums

$ 813,914,337

$ 832,580,093

Discounted expected future gross premiums (at original discount rate)

Discounted expected future gross premiums (at current discount rate)

following table summarizes the amount of gross premiums and interest accretion recognized in insurance premiums and other considerations

and increase in future policy benefits, respectively, in the consolidated statements of earnings for traditional and limited-payment

of Gross Premiums and Interest Accretion

Gross premiums

$ 118,920,945

$ 118,722,900

Interest accretion

following table summarizes the weighted-average interest rates for traditional and limited-payment life:

of Weighted-average Interest Rates

Interest accretion rate

Current discount rate

following table summarizes the weighted-average duration of the liability for traditional and limited-payment life:

of Weighted Average Duration of the Liability

Duration of the liability in years (at original discount rate)

Duration of the liability in years (at current discount rate)

2025 and 2024, there were immaterial impacts to net earnings for traditional and limited-payment life, where net premiums exceeded gross

premiums for certain issue-year cohorts.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Policy Benefits and Unpaid Claims (Continued)

Profit Liability

following table summarizes the balances of and changes in Deferred Profit Liability for traditional and limited- payment life:

of Balances of and Changes in Deferred Profit Liability for Traditional and Limited- Payment Life

Balance, beginning of year

$ 192,278,993

$ 177,843,975

Effect of actual variances from expected experience (1)

( 4,188,728 )

( 3,219,369 )

Adjusted balance, beginning of period

Profits deferred

Interest accrual

( 59,159,496 )

( 57,005,134 )

Other adjustments

Balance, end of period

Receivable from reinsurers

Deferred profit liability, net of reinsurance

$ 204,817,516

$ 191,261,315

For the years ended December 31, 2025, and 2024, the net effect

of actual variances from expected experience was primarily due to lapses.

Actual mortality and surrenders were close to expected.

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

claims, net of the related receivable from reinsurers.

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

Balance at 12/31/2023

58,116,837 (1)

12,416,335 (2)

( 59,882,755 )

( 12,540,133 )

( 72,426,655 )

Balance at 12/31/2024

60,422,703 (1)

12,874,267 (2)

( 59,844,155 )

( 12,826,904 )

( 72,754,368 )

Balance at 12/31/2025

Included in policyholder benefits and claims on the consolidated

statements of earnings

Released from policyholder account balances

Included in policyholder benefits and claims on the consolidated

statements of earnings

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Account Balances

Company reports policyholder account balances pursuant to the accounting policy discussed in Note 1.

The Company establishes liabilities

for policyholder account balances, which are generally equal to the account value, and which include interest credited.

following table provides a reconciliation of policyholder account balances and the related receivable from reinsurers to the consolidated

balance sheets.

of Reconciliation of Policyholder Account Balances and the Related Receivable from Reinsurers to the Consolidated

Balance Sheets

Policyholder account balances - fixed annuities

$ 104,233,454

$ 105,088,621

Deferred profit liability - fixed annuities

Policyholder account balances - universal life

Gross policyholder account balances

$ 140,605,750

$ 142,807,316

Receivable from reinsurers

Policyholder account balances - fixed annuities

Total receivable from reinsurers

Net policyholder account balances

$ 137,330,503

$ 139,391,672

following table summarizes the balances and changes in policyholder account balances for the lines of business indicated:

of Balances and Changes in Policyholder Account Balances

December 31, 2025

December 31, 2024

Balance, beginning of year

$ 105,088,621

$ 105,442,891

Interest credited

Policy charges (1)

( 2,314,244 )

( 2,296,283 )

Surrenders, withdrawals and benefit payments

( 2,106,815 )

( 14,230,007 )

( 1,245,669 )

( 14,385,591 )

Balance, end of period

Receivable from reinsurers

Policyholder account balances, net of reinsurance

$ 100,958,207

$ 101,672,977

Weighted-average crediting rate

Net amount at risk (2)

Cash surrender value

Contracts included in the policyholder account balances are

generally charged a premium and/or monthly assessments on the basis of the account balance.

Included in premiums and other considerations

on the consolidated statements of earnings.

For those guarantees of benefits that are payable in the event

of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account

balance at the balance sheet date.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Account Balances (Continued)

following table summarizes the balances of and changes in Deferred Profit Liability for fixed annuities:

of Balances of and Changes in Deferred Profit Liability for Fixed Annuities

Balance, beginning of year

Effect of actual variances from expected experience

Adjusted balance, beginning of period

Profits deferred

Interest accrual

Other adjustments

Balance, end of period

Receivable from reinsurers

Deferred profit liability, net of reinsurance

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Account Balances (Continued)

balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between

rates being credited to policyholders and the respective guaranteed minimums for the lines of business indicated are as follows:

Schedule of Account

Values by Range of Guaranteed Minimum Crediting Rates and the Related Range of Difference

December 31, 2025

Range of Guaranteed Minimum Crediting Rate

Universal Life

Less than 1.00%

1.00% - 1.99%

2.00% - 2.99%

3.00% - 4.00%

Greater than 4.00%

Fixed Annuities

Less than 1.00%

1.00% - 1.99%

2.00% - 2.99%

3.00% - 4.00%

Greater than 4.00%

$ 104,233,454

December 31, 2024

Range of Guaranteed Minimum Crediting Rate

Universal Life

Less than 1.00%

1.00% - 1.99%

2.00% - 2.99%

3.00% - 4.00%

Greater than 4.00%

Fixed Annuities

Less than 1.00%

1.00% - 1.99%

2.00% - 2.99%

3.00% - 4.00%

Greater than 4.00%

$ 105,088,621

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

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

Currently, the Company does not reinsure risks on newly issued policies.

The Company has also assumed various reinsurance agreements

through acquisition of various life companies and has assets held in trust related to certain agreements.

The Company is ultimately liable

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

The Company evaluates the financial

condition of reinsurers and monitors the concentration of credit risk.

The Company had a significant concentration of credit risk with

a single reinsurer of 94.6 % and 94.4 % of ceded life insurance in force as of December 31, 2025 and 2024, respectively.

This represented

approximately 7.6 % and 7.8 % of the Company’s total life insurance in force as of December 31, 2025 and 2024, respectively.

Company’s life insurance in force and premiums for reinsurance are summarized as follows:

Schedule of Life Insurance in Force and Premiums for Reinsurance

Life Insurance in force ($000)

Life Insurance

$ 121,324,575

$ 119,585,715

Accident and Health Insurance

Total premiums

$ 121,495,955

$ 119,757,103

Life Insurance in force ($000)

Life Insurance

$ 121,392,765

$ 119,467,788

Accident and Health Insurance

Total premiums

$ 121,580,714

$ 119,655,745

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

and Other Loans Payable

and other loans payable are summarized as follows:

Summary of Bank Loans Payable

Total bank and other loans

3.85 % fixed note payable in monthly installments of $ 243,781 including principal and interest, collateralized by real property with a book value of approximately $ 57,645,000 , due June 2032.

3.30 % fixed note payable in monthly installments of $ 179,562 including principal and interest, collateralized by real property with a book value of approximately $ 41,152,000 , due April 2031.

4.7865 % fixed interest only note payable in monthly installments, collateralized by real property with a book value of approximately $ 15,886,000 , due June 2028.

1 month SOFR rate plus 2.0 % loan purchase agreement with a warehouse line availability of $ 25,000,000 , matures August 2026.

1 month SOFR rate plus 2.1 % loan purchase agreement with a warehouse line availability of $ 15,000,000 , matures July 2026.

1 month SOFR rate plus 1.95 % loan purchase agreement with a warehouse line availability of $ 35,000,000 , matures August 2026.

Finance lease liabilities

Total bank and other loans

Less current installments

( 6,195,297 )

( 12,559,420 )

Bank and other loans, excluding current installments

following tabulation shows the combined maturities of bank and other loans payable:

of Combined Maturities of Bank and Other Loans Payable

expense in 2025 and 2024 was $ 4,518,965 and $ 4,254,100 , respectively.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

and Other Loans Payable (Continued)

Home Loan Bank Membership

Federal Home Loan Banks (“the FHLBs”) are a group of cooperatives that lending institutions use to finance housing and economic

development in local communities.

The Company is a member of the FHLB based in Des Moines, Iowa and based in Dallas, Texas.

of the FHLB, the Company is required to maintain a minimum investment in capital stock of the FHLB and may pledge collateral to the bank

for advances of funds to be used in its operations.

Home Loan Bank of Des Moines

of December 31, 2025 and 2024, the amount available for borrowings from the FHLB of Des Moines was approximately $ 48,350,685 and $ 41,235,894 ,

respectively.

As of December 31, 2025 and 2024, United States Treasury fixed maturity securities with an estimated fair value of $ 55,751,822

and $ 54,487,812 , respectively, have been pledged at the FHLB of Des Moines as collateral for current and potential borrowing.

As of December

31, 2025 and 2024, the Company had no outstanding FHLB borrowings.

As of December 31, 2025 and 2024, the Company’s total investment

in FHLB stock was $ 500,100 and $ 479,100 , respectively.

As of December 31, 2025, the Company was contingently liable under standby letters

of credit aggregating $ 3,884,998 .

These letters of credit are to be used to cover any contingency related to additional risk assessments

pertaining to the Company’s captive insurance program for $ 443,758 and for bonding of residential land development for $ 3,441,240 .

Home Loan Bank of Dallas

of December 31, 2025 and 2024, the amount available for borrowings from the FHLB of Dallas was approximately $ 6,087,398 and $ 8,342,442 ,

respectively.

As of December 31, 2025 and 2024, Mortgage-Backed fixed maturity securities with an estimated fair value of $ 6,784,513

and $ 9,312,642 , respectively have been pledged at the FHLB of Dallas as collateral for current and potential borrowings, respectively.

As of December 31, 2025 and 2024, the Company had no outstanding FHLB borrowings.

As of December 31, 2025, the Company’s total

investment in FHLB stock was $ 146,400 compared with $ 1,925,800 as of December 31, 2024.

Lines of Credit

Company has a $ 5,000,000 revolving line-of-credit with a bank with interest payable at a variable rate based on the adjusted daily SOFR

plus a margin of 2.25 %, secured by the capital stock of Security National Life and maturing June 1, 2026 , renewable annually.

As of December

31, 2025, the Company was contingently liable under standby letter of credit aggregating $ 1,250,000 , which is used as collateral for

SecurityNational Mortgage’s state licensing requirements.

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

The Company does not expect any material losses to result from the issuance of the standby letter of credit.

As of December 31, 2025

there were no amounts outstanding under the revolving line-of-credit.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

and Other Loans Payable (Continued)

Covenants for Mortgage Warehouse Lines of Credit

Company, through its subsidiary SecurityNational Mortgage, has three lines of credit for the purpose of funding mortgage loans-one through

Bank, a second through Western Alliance Bank and a third through JPMorgan Chase Bank.

Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $ 15,000,000 .

The relevant agreement contemplates

interest at 2.10% plus the greater of (i) 0% , and (ii) the one-month forward-looking term rate based on SOFR on drawn amounts and matures

on July 17, 2026 .

The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and a

minimum net income of $ 1 for the quarter.

Western Alliance Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $ 25,000,000 .

The relevant agreement

contemplates interest at the 1-Month SOFR rate plus 2.0% on drawn amounts and matures on August 15, 2026 .

The Company is required to

comply with covenants for adjusted tangible net worth, unrestricted cash balance, and a minimum pre-tax income of $ 1 for the year.

JPMorgan Chase Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $ 35,000,000 .

The relevant agreement

contemplates interest at the 1-Month SOFR rate plus 1.95% on drawn amounts and matures on August 15, 2026 .

The Company is required to

comply with covenants for adjusted tangible net worth, unrestricted cash balance, and a minimum pre-tax income of $ 1 for the year.

agreements for US Bank and JP Morgan Chase Bank warehouse lines of credit include a cross-default provision where certain events of

default under other of SecurityNational Mortgage’s obligations constitute events of default under the warehouse lines of

As of December 31, 2025, SecurityNational Mortgage was not in compliance with the net income covenant of the US Bank,

Western Alliance Bank and JP Morgan Chase Bank warehouse lines of credit.

SecurityNational Mortgage has since received waivers from

each of these lenders with respect to this covenant.

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

of approximately $ 4,173,449

on the warehouse lines of credit, the Company has sufficient cash to do so.

The Company has also performed an analysis of its

funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its current

business model.

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

Covenants for Revolving Lines of Credit and Bank Loans

Company’s revolving line of credit agreements contain debt covenants requiring the Company to maintain minimum operating cash flow

ratios and minimum net worth requirements for each of its business segments.

The Company is also subject to debt covenants under one

of its real estate loans which require maintenance of a minimum consolidated operating cash flow ratio, minimum liquidity amounts, and

minimum consolidated net worth value.

In addition to these financial debt covenants, the Company is required to provide segment specific

financial statements and building specific financial statements under the agreements for each of its bank loans.

As of December 31, 2025,

the Company was in compliance with all these debt covenants.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment

(an identified asset) for a period in exchange for consideration.

The Company determines if a contract is a lease at the inception of

the contract.

At the commencement date of a lease, the Company measures the lease liability at the present value of the lease payments

over the lease term, discounted using the discount rate for the lease.

The Company uses the rate implicit in the lease, if available,

otherwise the Company uses its incremental borrowing rate.

Also, at the commencement date of a lease, the Company measures the cost of

the related right-of-use asset which consists of the amount of the initial measurement of the lease liability, any lease payments made

to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred by the Company.

about the Nature of Leases and Subleases

Company leases office space and equipment from third parties under various non-cancelable agreements.

The Company has operating leases

for office space for its segments in areas where it conducts business.

The Company subleases some of this office space.

The Company also

has finance leases for certain equipment, such as copy machines and postage machines.

The Company does not have any lease agreements

with variable lease payments.

The Company has not included any options to extend or terminate leases in the recognition of the right-of-use

assets or lease liabilities because of the uncertainty that they will be exercised.

No residual value guarantees have been provided to

The Company does not have any restrictions or covenants imposed by leases.

that have not Commenced

Company does not have any leases that have not commenced that create significant rights or obligations for the Company.

Party Lease Transactions

Company does not have any related party lease transactions that require disclosure as of December 31, 2025.

Company made an accounting policy election not to apply the recognition requirements of ASC 842 to short-term leases, which are leases

that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying assets

that the lessee is reasonably certain to exercise.

Judgments and Assumptions

Company does not use any significant judgments or assumptions regarding the determination of whether a contract contains a lease;

allocation of the consideration in a contract between lease and non-lease components;

or the determination of the discount rates for

The following table presents the Company’s total lease cost recognized in earnings, amounts capitalized as right-of-use

assets and cash flows from lease transactions.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Schedule of Lease Cost Recognized in Earnings

Years Ended December 31

Finance lease cost:

Amortization of right-of-use assets (1)

Interest on lease liabilities (2)

Operating lease cost (3)

Short-term lease cost (3)(4)

Sublease income (3)

Total lease cost

Other Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

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

Operating leases

Finance leases

Weighted-average remaining lease term (in years)

Finance leases

Operating leases

Weighted-average discount rate

Finance leases

Operating leases

Included in Depreciation on property and equipment on the consolidated

statements of earnings

Included in Interest expense on the consolidated statements

Included in Rent and rent related expenses on the consolidated

statements of earnings

Includes leases with a term of 12 months or less

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

following table presents the maturity analysis of the Company’s lease liabilities.

of Future Minimum Rental Payments for Finance Leases and Operating Leases

Finance Leases

Operating Leases

Lease payments due in:

Total undiscounted lease payments

Discount on cash flows

Present value of lease liabilities

following table presents the Company’s right-of-use assets and lease liabilities.

Schedule of Right-of-Use Assets and Lease

Year Ended December 31,

Balance Sheet Location

Operating Leases

Right-of-use assets

Lease liabilities

Other liabilities and accrued expenses

Finance Leases

Right-of-use assets

Accumulated amortization

Right-of-use assets, net

Property and equipment, net

Lease liabilities

Bank and other loans payable

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

See Note 2 for

information about the Company’s real estate held for investment.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

to Note 1 regarding the adoption of ASU 2018-12 and ASU 2023-09.

July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes provisions that allow for

the immediate expensing of domestic research and development expenses, immediate expensing of certain capital expenditures, and other

changes to the U.S.

taxation of profits derived from foreign operations.

OBBBA did not have a material impact on the Company’s

estimated effective tax rate for 2025.

Company’s income tax liability is summarized as follows:

8 unchanged sentences

Deferred compensation

Tax on unrealized appreciation

Total deferred tax assets

Deferred policy acquisition costs

Basis difference in property, equipment and

Basis difference in property, equipment and real estate

Value of business acquired

3 unchanged sentences

Net deferred tax liability

Prior period amounts have been adjusted to conform to the

current period presentation.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Income Taxes (Continued)

Taxes (Continued)

Company’s income tax expense is summarized as follows:

1 unchanged sentence

Total Current Income Tax Expense (Benefit)

( 2,139,124 )

Total Deferred Income Tax

Expense (Benefit)

( 2,495,489 )

reconciliation of income tax expense at the U.S.

federal statutory rates is as follows:

Schedule of Effective Income Tax Rate Reconciliation

Computed expense at statutory rate

State tax expense (benefit), net of federal

Change in valuation allowance

( 1,506,144 )

Income tax expense

following table provides a rate reconciliation between income tax expense (benefit) and the statutory expectations.

of Effective Income Tax Rate Reconciliation between Income Tax Expense (Benefit) and Statutory Expectations

December 31, 2025

December 31, 2024

Federal statutory tax rate

State and local tax expense, net of federal income tax effect (1)

Nontaxable or nondeductible items

Effective tax rate

State taxes in Texas and Utah made up the majority (greater

than 50%) of the tax effect in this category.

Company’s overall effective tax rate for 2025 and 2024 was 22.4 % and 22.1 % respectively.

3 unchanged sentences

The increase in the effective

tax rate when compared to the prior year is partially due to the prior period reducing the valuation allowance related to Kilpatrick

Life Insurance Company to zero and no valuation allowance adjustment in the current period.

tax rate when compared to the prior year was partially due to an increase in non-deductible items.

of December 31, 2025, the Company had no significant unrecognized tax benefits.

3 unchanged sentences

for 2022 through 2025 are subject to examination by taxing authorities.

Summary of Operating Loss Carryforwards

Operating Losses and Tax Credit Carryforwards:

Summary of Operating Loss Carryforwards

Year of Expiration

4 unchanged sentences

Ended December 31, 2025 and 2024

Reinsurance, Commitments and Contingencies

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

The Company has also assumed various reinsurance agreements through acquisition of various life companies and has assets held

in trust related to certain agreements.

The Company is ultimately liable for these reinsured amounts in the event such reinsurers are

unable to pay their portion of the claims.

The Company evaluates the financial condition of reinsurers and monitors the concentration

of credit risk.

The Company had a significant concentration of credit risk with a single reinsurer of 94.4 % and 94.0 % of ceded life insurance

in force as of December 31, 2024 and 2023, respectively.

This represented approximately 7.8 % and 8.8 % of the Company’s total life

insurance in force as of December 31, 2024 and 2023, respectively.

Company’s life insurance in force and premiums for reinsurance are summarized as follows:

Schedule of Life Insurance in Force and Premiums for Reinsurance

Life Insurance

in force ($000)

Life Insurance

$ 121,392,765

$ 119,467,788

Accident and Health Insurance

Total premiums

$ 121,580,714

$ 119,655,745

Life Insurance in force

Life Insurance

$ 116,141,852

$ 114,442,986

Accident and Health Insurance

Total premiums

$ 116,357,294

$ 114,658,436

Loan Loss Settlements

loan losses can be extremely difficult to estimate.

However, the Company believes that the Company’s reserve methodology and its

current practice of property preservation allow it to estimate potential losses on loans sold.

See Note 3 for additional information

about the Company’s loan loss reserve.

Non-Cancelable

Company leases office space and equipment under various non-cancelable agreements.

See Note 23 regarding leases.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Reinsurance, Commitments and Contingencies (Continued)

Contingencies and Commitments

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

As of December

31, 2024, the Company’s commitments were approximately $ 216,368,000 for these loans, of which $ 152,361,000 had been funded.

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

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

The Company receives fees and interest for these loans and

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

Maturities range between six and eighteen months.

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

general liability programs.

The captive group maintains insurance reserves relative to these programs.

The level of exposure from catastrophic

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

When estimating the insurance liabilities

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

factors and valuations provided by independent third-party actuaries.

If actual claims or adverse development of loss reserves occurs

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

The estimation process contains uncertainty

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

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

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

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 representations concerning the likelihood of unfavorable outcomes,

no amounts have been accrued for the above claims in the consolidated financial statements.

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

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Retirement Plans

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

of Section 401(k) of the Internal Revenue Code.

The plans allow participants to make pretax contributions up to a maximum of $ 23,000

and $ 22,500 for the years 2024 and 2023, respectively or the statutory limits.

The Company matched 100% of up to 3% of an employee’s

total annual compensation and matched 50% of 4% to 5% of an employee’s annual compensation.

The match was in Company stock.

Company’s contribution for 2024 and 2023 was $ 768,288 and $ 1,819,275 , respectively under the plan.

Company has a Non-Qualified Deferred Compensation Plan.

Under the terms of the Plan, the Company will provide deferred compensation for

a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee

Retirement Income Security Act of 1974, as amended.

The Board has appointed a Committee of the Company to be the Plan Administrator and

to determine the employees who are eligible to participate in the plan.

The employees who participate may elect to defer a portion of

their compensation into the plan.

The Company may contribute into the plan at the discretion of the Company’s Board of Directors.

The Company did not make any contributions for 2024 and 2023.

June 2024, the Board members approved a motion to extend the Chief Executive Officer’s employment agreement, dated December 4,

2012, for an additional six-year term ending December 31, 2030.

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

would be continued for up to five years at 75% of its current level of compensation.

In the event of a sale or merger of the Company

and the Chief Executive Officer is not retained in his current position, the Company would be obligated to continue paying the Chief

Executive Officer’s current compensation and benefits for seven years following the merger or sale.

The agreement further provides

that the Chief Executive Officer is entitled to receive annual retirement benefits beginning (i) one month from the date of his retirement

(to commence no sooner than age 65), (ii) five years following complete disability, or (iii) upon termination of his employment without

These retirement benefits are to be paid for a period of twenty years in annual installments in the amount equal to 75% of his

then current level of compensation.

If the Chief Executive Officer dies prior to receiving all retirement benefits thereunder, the remaining

benefits are to be paid to his heirs.

The Company adjusted the accrual by $ 340,557 and nil during 2024 and 2023, respectively, to cover

the present value of anticipated retirement benefits under the employment agreement.

The liability accrued was $ 7,215,806 and $ 7,556,363

as of December 31, 2024 and 2023, respectively.

Company also has an employment agreement with its former Vice President of Mortgage Operations and President of SecurityNational Mortgage,

who retired from the Company on December 31, 2015.

Under the terms of the employment agreement, this individual is entitled to receive

retirement benefits from the Company for a period of ten years in an amount equal to 50% of his rate of compensation at the time of his

retirement , which was $ 267,685 for the year ended December 31, 2015.

If this individual dies prior to receiving all his retirement benefits

under his employment agreement, the remaining benefits will be made to his heirs.

The company has paid monthly installments that equal

an annual payment of $ 133,843 to this individual each year since 2016.

The liability accrued was $ 133,843 and $ 267,686 as of December

31, 2024 and 2023, respectively and is included in other liabilities and accrued expenses on the consolidated balance sheets.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Capital Stock

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

14 unchanged sentences

Exercise of stock options

Vesting of restricted stock

Conversion of Class C to

Vesting of restricted stock units

Conversion of Class C to Class A

Outstanding shares at December 31, 2024 (1)

Common stock, shares, outstanding, beginning

Outstanding shares, beginning

Exercise of stock options

Vesting of restricted stock

Conversion of Class C to

Vesting of restricted stock units

Conversion of Class C to Class A

Outstanding shares at December 31, 2025

Common stock, shares, outstanding, ending

(1) Adjusted retroactively for the effect

of annual stock dividends

Outstanding shares, ending

Adjusted retroactively for the effect of annual stock dividends

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Capital Stock (Continued)

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

In accordance with GAAP, the basic and diluted

earnings per share amounts were calculated as follows:

Other Comprehensive Income (Loss)

to Note 1 regarding the adoption of ASU 2018-12.

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

of Changes in Accumulated Other Comprehensive Income (Loss)

Unrealized gains on fixed maturity securities available for sale

Amounts reclassified into net earnings

Net unrealized gains (losses) before taxes

( 2,101,090 )

Unrealized gains on restricted assets (1)

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

Unrealized gains (losses)

Tax benefit (expense)

Interest rate remeasurement of future policy benefits

( 16,285,885 )

Tax benefit (expense)

( 9,442,910 )

( 12,865,848 )

Other comprehensive income (loss) changes

$ ( 4,957,506 )

Fixed maturity securities available for sale

following is the accumulated balances of other comprehensive income (loss) as of December 31, 2025:

of Accumulated Balances of Other Comprehensive Income

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

$ ( 7,147,384 )

Unrealized gains (losses) on restricted assets (1)

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

Interest rate remeasurement of future policy benefits

( 12,865,848 )

Other comprehensive income

$ ( 4,957,506 )

Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

following is the accumulated balances of other comprehensive income (loss) as of December 31, 2024:

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

$ ( 7,135,965 )

$ ( 7,147,384 )

Unrealized gains (losses) on restricted assets (1)

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

Interest rate remeasurement of future policy benefits

Other comprehensive income (loss)

$ ( 1,791,856 )

Fixed maturity securities available for sale

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

In accordance with GAAP, the basic and diluted earnings

per share were calculated as follows:

Schedule of Earnings Per Share, Basic and Diluted

Ended December 31,

Denominator for basic

earnings per share-weighted-average shares

Years Ended December 31,

Denominator for basic earnings per share-weighted-average shares

Effect of dilutive securities

Employee stock options

restricted stock units

Dilutive potential common

Denominator for diluted

share-adjusted weighted-average shares and assumed conversions

Unvested restricted stock units

Dilutive potential common shares

Denominator for diluted earnings per share-adjusted weighted-average shares and

assumed conversions

Basic earnings per share

Diluted earnings per share

2024 and 2023, there were 363,700 and nil of anti-dilutive employee stock option shares, respectively, that were not included in the

computation of diluted net earnings per common share as their effect would be anti-dilutive.

Basic and diluted earnings per share amounts

2025 and 2024, there were 435,485 and 363,700 of anti-dilutive employee stock option shares, respectively, that were not included in

the computation of diluted net earnings per common share as their effect would be anti-dilutive.

Basic and diluted earnings per share

are the same for each class of common stock.

2 unchanged sentences

Ended December 31, 2025 and 2024

Stock Compensation Plans

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

based compensation expense for stock options issued of $ 794,654 and $ 601,058 has been recognized under these plans for 2024 and 2023,

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

As of December 31, 2024, the total unrecognized

compensation expense related to the stock options issued was $ 1,096,891 , which is expected to be recognized over the remaining vesting

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

The Company estimates

the expected life of the options using the simplified method.

Future volatility is estimated based upon the weighted historical volatility

of the Company’s Class A Common Stock over a period equal to the expected life of the options.

The risk-free interest rate for

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

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

fair value of the stock options granted.

Schedule of Assumptions Used

of Each Option

Dividend Yield (1)

Risk-Free Interest Rate

Expected Life (years)

December 26, 2024

December 6, 2024

January 12, 2024

January 8, 2024

December 1, 2023

January 30, 2023

January 18, 2023

(1) Stock dividend

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Stock Compensation Plans (Continued)

activity of the stock option plans is summarized as follows:

Schedule of Activity of Stock Option Plans

Class A Shares

Average Exercise Price (2)

Class C Shares

Average Exercise Price (2)

Outstanding at January 1,

Adjustment for the effect

of stock dividends

Outstanding at December 31, 2023

Adjustment for the effect

of stock dividends

Outstanding at December 31, 2024

Exercisable at end of

Available options for

Weighted average contractual term of options outstanding at December

Weighted average contractual term of options exercisable at December

Aggregated intrinsic value of options

outstanding at December 31, 2024 (1)

Aggregated intrinsic value of options

exercisable at December 31, 2024 (1)

Company used a stock price of $ 12.03

as of December 31, 2024 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 2024 and 2023 was $ 3,104,163 and $ 657,354 , respectively.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Stock Compensation Plans (Continued)

Stock Units (“RSUs”)

based compensation expense for RSUs issued of $ 6,166 and $ 304 has been recognized under these plans for the 2024 and 2023, respectively,

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

As of December 31, 2024, the total unrecognized compensation

expense related to the RSUs issued was $ 37,299 , which is expected to be recognized over the remaining vesting period.

activity of the RSUs is summarized as follows:

Schedule of Activity Restricted Stock Units

Class A Shares

Average Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at December 31, 2023

Non-vested at December 31, 2024

Available RSUs for future

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

14) Statutory

Financial Information and Dividend Limitations

Company’s insurance subsidiaries are also required to prepare statutory-basis financial statements in conformity with accounting

practices prescribed or permitted by the insurance department of the applicable state of domicile.

The prescribed statutory accounting

practices include the Accounting Practices and Procedures Manual of the NAIC, a variety of publications of the NAIC, as well as state

laws, regulations, and general administrative rules.

Statutory accounting practices differ from GAAP primarily since they require expensing

policy acquisition and certain sales inducement costs as incurred, establishing life insurance reserves based on different actuarial

assumptions, applying different valuing methods for certain investments and accounting for deferred taxes on a different basis.

statutory net income and capital and surplus of the Company’s insurance subsidiaries, determined in accordance with statutory accounting

practices prescribed by insurance regulatory authorities are as follows:

Schedule of Statutory Accounting Practices

Statutory Net Income

Statutory Capital and Surplus

Years Ended December 31,

Amounts by insurance subsidiary:

Security National Life Insurance Company

Kilpatrick Life Insurance Company

First Guaranty Insurance Company

Southern Security Life Insurance Company, Inc.

Trans-Western Life Insurance Company

$ 120,216,493

$ 107,384,632

Insurance Departments impose minimum risk-based capital (“RBC”) requirements that were developed by the NAIC on insurance

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

activity based on the perceived degree of risk.

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

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

Enterprises below

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

insurance subsidiaries each have a ratio that is greater than the first level of regulatory action as of December 31, 2024.

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

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

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

subsidiaries net assets, as determined in accordance with statutory accounting practices, that exceed minimum statutory capital requirements.

Additional requirements must be met depending on the state, and payments of such amounts as dividends are subject to approval by regulatory

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Statutory Financial Information and Dividend Limitations (Continued)

the Utah Insurance Code, Security National Life Insurance Company is permitted to pay stockholder dividends, or otherwise make distributions,

to the Company subject to certain limitations.

Security National Life Insurance Company must ensure that its surplus held for policyholders

is reasonable in relation to its outstanding liabilities and adequate to its financial needs after payment of any such dividend or distribution.

Furthermore, where any dividend or distribution, together with all other dividends and distributions made within the preceding 12 months,

exceeds the lesser of (i) 10% of its surplus held for policyholders as of the next preceding December 31;

or (ii) its net gain from operations,

not including realized capital gains, for the 12-month period ending the next preceding December 31, such dividend or distribution constitutes

“extraordinary” under Utah law and Security National Life Insurance Company would be required to file notice of its intention

to declare such a dividend or make such a distribution with the Utah Commissioner and the Utah Commissioner must either approve the distribution

or dividend or not disapprove the dividend or distribution within 30 days’ of the notice filing.

Based on Security National Life

Insurance Company’s surplus held for policyholders and net gain from operations as of December 31, 2024, the maximum aggregate

amount of dividends and distributions that it could pay or make in 2024 and which would not constitute an “extraordinary”

dividend or distribution under Utah law and would therefore not require notice and approval or lack of disproval from the Utah Commissioner,

would be approximately $ 7,358,000 .

the Louisiana Insurance Code, First Guaranty Insurance Company and Kilpatrick Life Insurance Company are permitted to pay stockholder

dividends, or otherwise make distributions, to the Company subject to certain limitations.

First Guaranty Insurance Company and Kilpatrick

Life Insurance Company must ensure that its surplus held for policyholders is reasonable in relation to its outstanding liabilities and

adequate to its financial needs after payment of any such dividend or distribution.

Furthermore, where any dividend or distribution,

together with all other dividends and distributions made within the preceding 12 months, exceeds the lesser of (i) 10% of its surplus

held for policyholders as of the next preceding December 31;

or (ii) its net gain from operations, not including realized capital gains,

for the 12-month period ending the next preceding December 31, such dividend or distribution constitutes “extraordinary”

under Louisiana law and First Guaranty Insurance Company and Kilpatrick Life Insurance Company would be required to file notice of its

intention to declare such a dividend or make such a distribution with the Louisiana Commissioner and the Louisiana Commissioner must

either approve the distribution or dividend or not disapprove the dividend or distribution within 30 days’ of the notice filing.

Based on First Guaranty Insurance Company’s and Kilpatrick Life Insurance Company’s surplus held for policyholders and net

gain from operations as of December 31, 2024, the maximum aggregate amount of dividends and distributions that it could pay or make in

2024 and which would not constitute an “extraordinary” dividend or distribution under Louisiana law and would therefore not

require notice and approval or lack of disproval from the Louisiana Commissioner, would be approximately $ 742,000 for First Guaranty

Insurance Company and $ 1,974,000 for Kilpatrick Life Insurance Company.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Segment Information

Note 1 regarding the adoption of ASU 2023-07.

of Products and Services by Segment

Company has three

operating and reportable business segments:

Company has identified three operating and reportable business segments:

life insurance, cemetery and mortuary, and mortgage.

The Company’s life insurance

segment’s revenue consists of life insurance premiums, fees earned on factored life insurance policies and net investment

income derived from investing policyholder and surplus funds.

Its expenses include operating expenses to collect insurance premiums

and insurance policy receivables, administer claims, and commissions related to the sale of insurance products sold by the

Company’s independent agency force.

The Company’s cemetery and mortuary segment’s revenue consists of fees from

the sale of at-need cemetery and mortuary merchandise, services at its mortuaries and cemeteries, pre-need sales of cemetery spaces

after collection of 10% or more of the purchase price and the net investment income from investing surplus cash.

include operating expenses to maintain mortuary and cemetery operations and commissions related to the sale of insurance products

sold by the Company’s agents.

The Company’s mortgage segment’s revenue consists of residential mortgage

origination fee income and mortgage interest income.

Its expenses include normal operating expenses related to the origination and

sale of residential mortgage loans, loan servicing and warehouse interest and fee expenses.

The Company’s

life insurance segment revenue consists of life insurance premiums;

fees earned on insurance assignment funding and net investment income

derived from investing policyholder and surplus funds.

Its expenses include operating expenses to collect insurance premiums and insurance

policy receivables, and administer claims, and commissions payable related to the sale of insurance products sold by the Company’s

independent agency force.

The Company’s cemetery and mortuary segment revenue consists of fees from the sale of at-need cemetery

and mortuary merchandise, services at its mortuaries and cemeteries, pre-need sales of cemetery spaces and the net investment income

from investing surplus cash.

Its expenses include operating expenses to maintain mortuary and cemetery operations and commissions related

to the sale of insurance products sold by the Company’s agents.

The Company’s mortgage segment revenue consists of residential

mortgage origination fee income and mortgage interest income.

Its expenses include normal operating expenses related to the origination

and sale of residential mortgage loans, loan servicing, and warehouse interest and fee expenses.

and Cost Sharing Policies

accounting policies of the Company’s operating and reportable segments are the same as those described in the Significant

Accounting Principles.

Intersegment revenues are recorded at cost plus an agreed upon intercompany profit and are eliminated upon

consolidation.

In addition to revenues, the reportable segments share in business services and costs including personnel expenses,

rent, information technology, software, interest expense, and other similar operating costs.

These shared services and costs are

allocated between the segments using prevailing market rates and other agreed upon allocation methods.

Factors Management Used to Identify the Company’s Operating and Reportable

Company’s operating and reportable segments are business units that are managed separately due to the different products

provided and the need to report separately to the various regulatory jurisdictions.

accounting policies of the Company’s operating and reportable segments are the same as those described in the Significant Accounting

Intersegment revenues are recorded at cost plus an agreed upon intercompany profit and are eliminated upon consolidation.

In addition to revenues, the reportable segments share in business services and costs including personnel expenses, rent, information

technology, software, interest expense, and other similar operating costs.

These shared services and costs are allocated between the

segments using prevailing market rates and other agreed upon allocation methods.

Management Used to Identify the Company’s Operating and Reportable Segments

Company’s operating and reportable segments are business units that are managed separately due to the different products provided

and the need to report separately to the various regulatory jurisdictions.

Operating Decision Maker (“CODM”)

The Company’s CODM is the Chief Executive Officer.

The following table

summarizes significant segment expenses.

The significant expenses are based on the information that the CODM is regularly provided to

assess segment performance.

The CODM reviews the regularly provided information for each segment monthly and gives added emphasis on month

over month and year over year comparative results.

The CODM considers these comparative results when making decisions about the allocation

of the Company’s resources to each segment.

The measure of segment profit or loss for the Company’s three operating and reportable

business segments is net earnings.

Company’s CODM is the Chief Executive Officer.

The following table summarizes significant segment expenses.

The significant expenses

are based on the information that the CODM is regularly provided to assess segment performance.

The CODM reviews the regularly provided

information for each segment monthly and gives added emphasis on month-over-month and year-over-year comparative results.

The CODM considers

these comparative results when making decisions about the allocation of the Company’s resources to each segment.

The measure of

segment profit or loss for the Company’s three operating and reportable business segments is net earnings.

NATIONAL FINANCIAL CORPORATION

10 unchanged sentences

Net investment income

Gains (losses) on investments and other assets

Gains on investments and other assets

Other revenues

4 unchanged sentences

Total consolidated revenues

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

Policyholder benefits and claims

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

10 unchanged sentences

Income tax expense (benefit)

( 1,263,871 )

Segment net earnings (loss)

9 unchanged sentences

Expenditures for long-lived assets

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

Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage fees.

Included in other expenses on the consolidated statements of

Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage

For each reportable segment, other segment items includes:

Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses.

Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible

assets, and certain overhead expenses.

Cemetery/Mortuary

- bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of

intangible assets, and certain overhead expenses.

- bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage

servicing rights, and certain overhead expenses.

- bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible

assets, and certain overhead expenses.

- bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization

expense of mortgage servicing rights, and certain overhead expenses.

For each reportable segment, intersegment expenses includes:

Life Insurance - mortgage servicing fees and interest expense.

Cemetery/Mortuary - rent expense, data processing and IT related expenses, and interest expense.

Mortgage - rent expense and interest expense.

Insurance - mortgage servicing fees and interest expense.

Cemetery/Mortuary

- rent expense, data processing and IT related expenses, and interest expense.

- rent expense and interest expense.

NATIONAL FINANCIAL CORPORATION

7 unchanged sentences

$ 107,558,640

$ 256,251,558

Net investment income

6 unchanged sentences

Total consolidated revenues

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

Policyholder benefits and claims

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

21 unchanged sentences

Expenditures for long-lived assets

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

Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage fees.

Included in other expenses on the consolidated statements of

Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage

For each reportable segment, other segment items includes:

Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses.

Cemetery/Mortuary - bad

debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of

intangible assets, and certain overhead expenses.

Mortgage - bad debt,

insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization

expense of mortgage servicing rights, and certain overhead expenses.

Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible

assets, and certain overhead expenses.

Cemetery/Mortuary

- bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible

assets, and certain overhead expenses.

Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues

and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses.

For each reportable segment, intersegment expenses includes:

Life Insurance - mortgage

servicing fees and interest expense.

Cemetery/Mortuary - rent expense, data processing and IT related expenses, and interest expense.

Mortgage - rent expense and interest expense.

Insurance - mortgage servicing fees and interest expense.

Cemetery/Mortuary

- rent expense, data processing and IT related expenses, and interest expense.

- rent expense and interest expense.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Party Transactions

Company’s Board of Directors has a written procedure, which requires disclosure to the Board of any material interest or any affiliation

on the part of any of its officers, directors or employees that is in conflict or may conflict with the interests of the Company.

Company and its Board of Directors are unaware of any related party transactions that require disclosure as of December 31, 2024.

Value of Financial Instruments

10 unchanged sentences

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities

in non-active markets;

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.

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

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

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

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.

following methods and assumptions were used by the Company in estimating the fair value disclosures related to significant financial

following methods and assumptions were used by the Company in estimating the fair value presented in its disclosures related to significant

financial instruments:

items shown under Level 1 and Level 2 are valued as follows:

5 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Fair Value of Financial Instruments (Continued)

A portion of these assets include equity securities and fixed maturity securities available for sale that have quoted

11 unchanged sentences

there were no transfers between Level 1 and Level 2 in the fair value hierarchy.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Value of Financial Instruments (Continued)

items shown under Level 3 are valued as follows:

33 unchanged sentences

Fair value is generally determined by obtaining an independent appraisal, which typically considers

area comparable properties and property condition.

area comparable properties and property conditions.

The Company believes that in an orderly market, fair value approximates the replacement

3 unchanged sentences

in rental properties with the funds required for estimated future policy benefits.

Accordingly, in addition to an appraisal, the fair

value determination will generally be weighed more heavily toward the rental analysis.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Fair Value of Financial Instruments (Continued)

Accordingly, in addition to an appraisal, the determination

of the fair value will generally be weighed more heavily toward the rental analysis.

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

of building cost information to the real estate construction industry.

For the investment analysis, the Company used market data based

upon its real estate operation experience and projected the present value of the net rental income over seven years.

The Company also

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

For the investment analysis, the Company uses market data based

upon its real estate operation experience and projected the present value of net rental income over seven years.

The Company also considers

comparable properties int the area and property conditions when determining fair value.

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

1 unchanged sentence

the book value of these properties and lessens the exposure to the Company from further deterioration in real estate values.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2025 and 2024

Value of Financial Instruments (Continued)

Servicing Rights :

4 unchanged sentences

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

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

8 unchanged sentences

Derivatives - loan commitments (3)

Total assets accounted for at fair value on a

recurring basis

Total assets accounted for at fair value on a recurring basis

$ 581,178,900

1 unchanged sentence

$ 158,243,651

Liabilities accounted for at fair value on a

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - loan commitments (4)

4 unchanged sentences

$ ( 220,605 )

(1) Fixed maturity

securities available for sale

Fixed maturity securities available for sale

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

Included in other assets on the consolidated balance sheets

Included in other liabilities and accrued expenses on the consolidated

balance sheets

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Fair Value of Financial Instruments (Continued)

Value of Financial Instruments (Continued)

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

their classification in the consolidated balance sheet as of December 31, 2024.

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a

recurring basis

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

8 unchanged sentences

Derivatives - loan commitments (3)

Total assets accounted for at fair value on a

recurring basis

Total assets accounted for at fair value on a recurring basis

$ 536,860,288

1 unchanged sentence

$ 137,679,163

Liabilities accounted for at fair value on a

recurring basis

Liabilities accounted for at fair value on a recurring basis

Derivatives - loan commitments (4)

1 unchanged sentence

$ ( 3,034,879 )

Total liabilities accounted for at fair value

on a recurring basis

Total liabilities accounted for at fair value on a recurring basis

$ ( 3,034,879 )

(1) Fixed maturity

securities available for sale

Fixed maturity securities available for sale

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

Included in other assets on the consolidated balance sheets

Included in other liabilities and accrued expenses on the consolidated

balance sheets

Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2025, the significant unobservable inputs

used in the fair value measurements were as follows:

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

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

Range of Inputs

14 unchanged sentences

Ended December 31, 2025 and 2024

Fair Value of Financial Instruments (Continued)

Value of Financial Instruments (Continued)

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

15 unchanged sentences

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

Net Derivatives Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Net Derivatives

Fixed Maturity

Available for Sale

Balance - December 31, 2024

9 unchanged sentences

( 833,073 ) (1)

53,052,338 (1)

Included in other comprehensive income

1 unchanged sentence

$ 155,968,266

(1) As a component of mortgage fee income on the consolidated statements of earnings

(2) As a component of net investment income on the consolidated statements of earnings

As a component of mortgage fee income on the consolidated statements

As a component of net investment income on the consolidated

statements of earnings

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

Net Derivatives Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

Net Derivatives

Fixed Maturity

Available for Sale

Balance - December 31, 2023

4 unchanged sentences

( 2,338,209,587 )

Transfer to mortgage loans held for investment

( 3,017,626 )

Foreclosed into real estate held for sale

Foreclosed into receivables

Total gains (losses):

1 unchanged sentence

48,253,050 (1)

39,760,652 (1)

Included in other comprehensive income

1 unchanged sentence

$ 131,181,148

(1) As a component

of mortgage fee income on the consolidated statements of earnings

(2) As a component

of net investment income on the consolidated statements of earnings

As a component of mortgage fee income on the consolidated statements

As a component of net investment income on the consolidated

statements of earnings

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Fair Value of Financial Instruments (Continued)

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 December 31,

2024 and 2023, respectively.

2025, or 2024, respectively.

Value of Financial Instruments Carried at Other Than Fair Value

9 unchanged sentences

Schedule of Financial Instruments Carried at Other Than Fair Value

Carrying Value

Total Estimated Fair Value

Mortgage loans held for investment

12 unchanged sentences

$ ( 87,490,315 )

Policyholder account balances (3)

Policyholder account balances - universal life

( 35,825,494 )

1 unchanged sentence

( 35,986,392 )

Future policy benefits - annuities (3)

Policyholder account balances - fixed annuities

( 104,780,256 )

1 unchanged sentence

( 103,880,576 )

(1) Included in other

investments and policy loans on the consolidated balance sheets

(2) Mortgage loans

held for investment

(3) Included in future

policy benefits and unpaid claims on the consolidated balance sheets

Included in other investments and policy loans on the consolidated

balance sheets

Mortgage loans held for investment

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Fair Value of Financial Instruments (Continued)

Value of Financial Instruments (Continued)

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 December 31, 2024:

Carrying Value

Total Estimated Fair Value

Mortgage loans held for investment

12 unchanged sentences

$ ( 90,455,678 )

Policyholder account balances (3)

Policyholder account balances - universal life

( 37,091,230 )

1 unchanged sentence

( 37,626,593 )

Future policy benefits - annuities (3)

Policyholder account balances - fixed annuities

( 105,716,086 )

1 unchanged sentence

( 104,611,544 )

(1) Included in other

investments and policy loans on the consolidated balance sheets

(2) Mortgage loans

held for investment

(3) Included in future

policy benefits and unpaid claims on the consolidated balance sheets

Included in other investments and policy loans on the consolidated

balance sheets

Mortgage loans held for investment

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

8 unchanged sentences

interest rates for single family mortgages and considering pricing of similar loans that were sold recently.

Construction — These loans are primarily short in maturity.

Accordingly, the estimated fair value is determined to be the carrying

Construction — These loans primarily have short term maturities.

Accordingly, the estimated fair value is determined to be the

carrying value.

— The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current

interest rates for commercial mortgages.

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

their fair values because they are fully collateralized by the cash surrender value of the underlying insurance policies.

These loans are fully collateralized by the cash surrender value of the underlying insurance policy.

Accordingly, the

carrying amounts reported in the accompanying consolidated balance sheets approximate their fair values.

Assignments, Net :

These investments are short in maturity.

Accordingly, the carrying amounts reported in the accompanying consolidated

balance sheet for these financial instruments approximate their fair values.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Fair Value of Financial Instruments (Continued)

These investments primarily have short term maturities.

Accordingly, the carrying amounts reported in the accompanying

consolidated balance sheets approximate their fair values.

and Other Loans Payable :

4 unchanged sentences

market rates.

Account Balances and Future Policy Benefits-Annuities :

Future policy benefit reserves for interest-sensitive insurance products

are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges.

Policy benefits

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

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

The fair values for these investment-type insurance

policies are estimated based on the present value of liability cash flows.

The fair values for the Company’s insurance policies

other than investment-type policies are not required to be disclosed.

However, the fair values of liabilities under all insurance policies

are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure

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

18) Accumulated

Other Comprehensive Income (loss)

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

Schedule of Changes in Accumulated Other Comprehensive Income

Unrealized gains on fixed maturity securities available for sale

Amounts reclassified into net earnings

Net unrealized gains (losses) before taxes

Tax benefit (expense)

( 1,640,186 )

Unrealized gains on restricted assets (1)

Tax benefit (expense)

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

Tax benefit (expense)

Other comprehensive income (loss) changes

Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Accumulated Other Comprehensive Income (loss) (Continued)

following is the accumulated balances of other comprehensive income (loss) as of December 31, 2024:

Schedule of Accumulated Balances of Other Comprehensive Income

Beginning Balance December 31, 2023

Change for the period

Ending Balance December 31,

Unrealized gains on fixed maturity securities

available for sale

$ ( 6,876,629 )

$ ( 6,941,915 )

Unrealized gains (losses) on restricted assets (1)

Unrealized losses on cemetery perpetual

care trust investments (1)

Other comprehensive loss

$ ( 6,885,558 )

$ ( 6,951,266 )

Fixed maturity securities available for sale

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

Beginning Balance December 31, 2022

Change for the period

Ending Balance December 31,

Unrealized 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)

$ ( 13,070,277 )

$ ( 6,885,558 )

Fixed maturity securities available for sale

Account Balances :

Policyholder account balances for interest-sensitive insurance products are computed under a retrospective

deposit method and represent policy account balances before applicable surrender charges.

Policy benefits and claims that are charged

to expense include benefit claims incurred in the period more than related policy account balances.

Interest credit rates for interest-sensitive

insurance products ranged from 1.5 % to 6.5 %.

The fair values for these investment-type insurance policies are estimated based on the

present value of liability cash flows.

The fair values for the Company’s insurance policies other than investment-type policies

are not required to be disclosed.

However, the fair values of liabilities under all insurance policies are taken into consideration in

the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized

through the matching of investment maturities with amounts due under insurance policies.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

19) Derivative Instruments

Company reports derivative instruments pursuant to the accounting policy discussed in Note 1.

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

of Derivative Assets at Fair Value

December 31, 2024

Compensation Plans and Retirement Plans

Compensation Plans

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

Plan” or “the Plans”).

based compensation expense for stock options issued of $ 1,281,569 and $ 794,654 has been recognized under these Plans for 2025 and 2024,

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

As of December 31, 2025, the total unrecognized

compensation expense related to the stock options issued was $ 1,681,944 , which is expected to be recognized over the remaining vesting

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

The Company estimates

the expected life of the options using the simplified method.

Future volatility is estimated based upon the weighted historical volatility

of the Company’s Class A Common Stock over a period equal to the expected life of the options.

The risk-free interest rate for

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

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

fair value of the stock options granted.

Schedule of Assumptions Used

Weighted-Average

of Each Option

Weighted-Average

Interest Rate

Weighted-Average

December 5, 2025

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

$ 210,597,657

$ 161,832,250

$ 210,597,657

$ 161,832,250

following table presents the gains (losses) on derivatives.

There were no gains or losses reclassified from accumulated other comprehensive

income into income, or gains or losses recognized into income on the ineffective portion of the derivatives or any amounts excluded from

effective testing.

Schedule of Gains and Losses on Derivatives

Years ended December 31,

Classification

Loan commitments

Mortgage fee income

$ ( 1,123,615 )

Call and put options

Gains on investments and other assets

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Servicing Rights

Company reports MSRs pursuant to the accounting policy discussed in Note 1.

following table presents the MSR activity.

of Mortgage Servicing Rights

Amortized cost:

Balance before valuation allowance at beginning of year

MSR additions resulting from loan sales

Amortization (1)

Application of valuation allowance to write down MSRs

with other than temporary impairment

Balance before valuation allowance at year end

Valuation allowance for impairment of MSRs:

Balance at beginning of year

Application of valuation allowance to write down MSRs

with other than temporary impairment

Balance at year end

Mortgage servicing rights, net

Estimated fair value of MSRs at year end

(1) Included in other

expenses on the consolidated statements of earnings

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 December 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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Mortgage Servicing Rights (Continued)

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

statements of earnings.

of Other Revenues

Years Ended December 31,

Contractual servicing fees

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

of Unpaid Principal Balances of the Servicing Portfolio

Servicing UPB

$ 385,134,774

$ 414,147,436

following key assumptions were used in determining MSR value.

of Assumptions Used in Determining MSR Value

March 21, 2025

January 9, 2025

December 26, 2024

December 6, 2024

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Policy Benefits and Unpaid Claims

Company reports future policy benefits and unpaid claims pursuant to the accounting policy discussed in Note 1.

following table provides information regarding future policy benefits and unpaid claims and the related receivable from reinsurers.

Schedule of Liability for Future Policy Benefits, by Product Segment

$ 790,212,538

$ 756,936,902

Policyholder account balances

Accident and health

Other policyholder funds

Reported but unpaid claims

Incurred but not reported claims

Gross future policy benefits and unpaid claims

$ 944,811,843

$ 916,038,616

Receivable from reinsurers

Accident and health

Reported but unpaid claims

Incurred but not reported claims

Total receivable from reinsurers

Net future policy benefits and unpaid claims

$ 930,980,750

$ 901,181,557

Net unpaid claims

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

claims, net of the related receivable from reinsurers.

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

Accident and Health

Balance at 12/31/2022

61,390,517 (1)

12,669,463 (2)

( 62,665,619 )

( 12,939,637 )

( 75,634,664 )

Balance at 12/31/2023

58,116,837 (1)

12,416,335 (2)

( 59,882,755 )

( 12,540,133 )

( 72,426,655 )

Balance at 12/31/2024

(1) See death benefits

on the consolidated statements of earnings

(2) Included in increase

in future benefits on the consolidated statements of earnings

(3) Included in surrender

and other policy benefits on the consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Revenues from Contracts with Customers

Company reports revenues from contracts with customers pursuant to ASC No.

606, Revenue from Contracts with Customers.

with Customers

about Performance Obligations and Contract Balances

Company’s cemetery and mortuary segment sells a variety of goods and services to customers in both at-need and pre-need situations.

Due to the timing of the fulfillment of the obligation, revenue is deferred until that obligation is fulfilled.

The total contract liability

for future obligations is included in deferred pre-need cemetery and mortuary contract revenues on the consolidated balance sheets and,

as of December 31, 2024 and 2023, the balances were $ 20,168,405 and $ 18,237,246 , respectively.

Company’s three types of future obligations are as follows:

Merchandise and Service Revenue :

All pre-need merchandise and service revenue is deferred, and the funds are placed in trust

until the need arises, the merchandise is received, or the service is performed.

The trust is then relieved, and the revenue and commissions

are recognized.

As of December 31, 2024 and 2023, the balances were $ 19,511,868 and $ 17,424,764 , respectively.

Specialty Merchandise Revenue :

At-need specialty merchandise revenue consists of customizable merchandise ordered from a manufacturer

such as markers and bases.

When specialty merchandise is ordered, it can take time to manufacture and deliver the product.

deferred until the at-need merchandise is received.

As of December 31, 2024 and 2023, the balances were $ 656,537 and $ 812,482 , respectively.

Deferred revenue for at-need specialty revenue is not placed in trust.

Pre-need Land Revenue :

Deferred pre-need revenue and corresponding commissions are deferred until 10% of the funds are received

from the customer through regular monthly payments.

As of December 31, 2024 and 2023, the balances were nil and nil , respectively.

pre-need land revenue is not placed in trust.

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

Goods or services are deferred until such a time

the service is performed, or merchandise is received.

Pre-need contracts are required to be paid in full prior to a customer using a

good or service from a pre-need contract.

Goods and services from pre-need contracts can be transferred when paid in full from one owner

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

A transfer of goods and

services does not fulfill an obligation and revenue remains deferred.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Revenues 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 (1/1/2024)

Closing (12/31/2024)

Increase/(decrease)

Contract Balances

Receivables (1)

Contract Asset

Contract Liability

Opening (1/1/2023)

Closing (12/31/2023)

Increase/(decrease)

(1) Included in Receivables,

net on the consolidated balance sheets

following table disaggregates the opening and closing balances of the Company’s contract balances.

Schedule of Opening and Closing Balances of the Assets and Liabilities

Contract Balances

Contract Asset

Contract Liability

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Opening (1/1/2024)

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Closing (12/31/2024)

Contract Balances

Contract Asset

Contract Liability

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Opening (1/1/2023)

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Closing (12/31/2023)

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Revenues from Contracts with Customers (Continued)

amount of revenue recognized for 2024 and 2023 that was included in the opening contract liability balance was $ 5,324,668 and $ 4,539,540 ,

respectively.

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

from the timing difference between the Company’s performance and the customer’s payment.

Disaggregation

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

of Revenues of the Cemetery and Mortuary Contracts

goods/service lines

Net mortuary and cemetery

of Revenue Recognition

transferred at a point in time

Net mortuary and cemetery

Judgments and Estimates

Company’s cemetery and mortuary segment recognizes revenue on future performance obligations when goods are delivered and when

services are performed and is not determined by the terms or payments of the contract as long as any good or service is paid in full

prior to delivery.

Prices are determined based on the market at the time a contract is created.

Goods or services are not partially completed.

There are no significant judgements, estimations, or allocation methods for when revenue should be recognized.

Company has not elected to use any of the practical expedients.

Company’s cemetery and mortuary segment defer certain costs associated with obtaining a contract on future obligations.

Merchandise and Service Revenue :

Pre-need merchandise and service revenues are deferred until the goods or services are delivered.

Recognition can be years until the obligations are satisfied.

Commissions and other costs are capitalized and deferred until the obligation

is satisfied.

Other costs include rent on pre-need offices and training rooms, and call center costs.

Costs that are allocated based

on a percentage include family service advisor compensation, bonuses, utilities, and supplies that are all used to procure a pre-need

Specialty Merchandise Revenue :

At-need specialty merchandise is ordered from a third-party manufacturer.

Generally, at-need specialty

merchandise is ordered and received within 90 days of order.

These orders are also short-term in nature and are deferred until the product

is received from the manufacturer and the obligation is satisfied.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Revenues from Contracts with Customers (Continued)

Pre-need Land Revenue :

Revenue is recognized on pre-need land sales when the customer has paid at least 10% toward the land price.

In cases where customers pay less than 10% of the revenue and associated commissions are deferred until such a time when 10% of the contract

price is received.

following table disaggregates contract costs that are included in the deferred policy and pre-need contract acquisition costs on the

consolidated balances sheets.

of Reconciliation of Revenues from Cemetery and mortuary contracts to Business Segment Information

Pre-need merchandise and services

At-need specialty merchandise

Pre-need land sales

Deferred policy and pre-need

contract acquisition costs

lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment

(an identified asset) for a period in exchange for consideration.

The Company determines if a contract is a lease at the inception of

the contract.

At the commencement date of a lease, the Company measures the lease liability at the present value of the lease payments

over the lease term, discounted using the discount rate for the lease.

The Company uses the rate implicit in the lease, if available,

otherwise the Company uses its incremental borrowing rate.

Also, at the commencement date of a lease, the Company measures the cost of

the related right-of-use asset which consists of the amount of the initial measurement of the lease liability, any lease payments made

to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred by the Company.

about the Nature of Leases and Subleases

Company leases office space and equipment from third parties under various non-cancelable agreements.

The Company has operating leases

for office space for its segments in areas where it conducts business.

The Company subleases some of this office space.

The Company also

has finance leases for certain equipment, such as copy machines and postage machines.

The Company does not have any lease agreements

with variable lease payments.

The Company has not included any options to extend or terminate leases in the recognition of the right-of-use

assets or lease liabilities because of the uncertainty that they will be exercised.

No residual value guarantees have been provided to

The Company does not have any restrictions or covenants imposed by leases.

that have not Commenced

Company does not have any leases that have not commenced that create significant rights or obligations for the Company.

Party Lease Transactions

Company does not have any related party lease transactions that require disclosure as of December 31, 2024.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Leases (Continued)

Company made an accounting policy election not to apply the recognition requirements of ASC 842 to short-term leases, which are leases

that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying assets

that the lessee is reasonably certain to exercise.

Judgments and Assumptions

Company does not use any significant judgments or assumptions regarding the determination of whether a contract contains a lease;

allocation of the consideration in a contract between lease and non-lease components;

or the determination of the discount rates for

The following table presents the Company’s total lease cost recognized in earnings, amounts capitalized as right-of-use

assets and cash flows from lease transactions.

Schedule of Lease Cost Recognized in Earnings

Years Ended December 31

Finance lease cost:

Amortization of right-of-use assets (1)

Interest on lease liabilities (2)

Operating lease cost (3)

Short-term lease cost (3)(4)

Sublease income (3)

Total lease cost

Other Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

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

Operating leases

Finance leases

Weighted-average remaining lease term (in years)

Finance leases

Operating leases

Weighted-average discount rate

Finance leases

Operating leases

(1) Included in Depreciation on property and equipment on the consolidated statements of earnings

(2) Included in Interest expense on the consolidated statements of earnings

(3) Included in Rent and rent related expenses on the consolidated statements of earnings

(4) Includes leases with a term of 12 months or less

January 12, 2024

January 8, 2024

Stock dividend

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2025 and 2024

Leases (Continued)

following table presents the maturity analysis of the Company’s lease liabilities.

of Future Minimum Rental Payments for Finance Leases and Operating Leases

Finance Leases

Operating Leases

Lease payments due in:

Total undiscounted lease payments

Discount on cash flows

Present value of lease liabilities

following table presents the Company’s right-of-use assets and lease liabilities.

Schedule of Right-of-Use Assets and Lease

Year Ended December 31,

Balance Sheet Location

Operating Leases

Right-of-use assets

Lease liabilities

Other liabilities and accrued expenses

Lease liabilities

Other liabilities and accrued expenses

Finance Leases

Right-of-use assets

Accumulated amortization

Right-of-use assets, net

Property and equipment, net

Right-of-use assets, net

Property and equipment, net

Lease liabilities

Bank and other loans payable

Lease liabilities

Bank and other loans payable

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

See Note 2 for

information about the Company’s real estate held for investment.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compensation Plans and Retirement Plans (Continued)

activity of the Plans is summarized as follows:

Schedule of Activity of Stock Option Plans

Outstanding at December 31, 2023

Adjustment for the effect of stock dividends

Outstanding at December 31, 2024

Adjustment for the effect of stock dividends

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data