What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-03-29 · 1068 added, 1067 removed, 2628 unchanged (45% of the section changed)

13 unchanged sentences

as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income, stockholders’ equity,

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

referred 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, 2023 and 2022, 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 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.

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

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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.

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.

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.

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:

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:

these actuarial assumptions, including testing the accuracy and completeness of the supporting experience studies,

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,

the results of the Company’s annual premium deficiency tests.

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

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respectively;

net of allowance for credit losses of $ 314,549 and nil for

2023 and 2022, respectively)

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

$ 314,549 for 2024 and 2023, respectively)

$ 366,546,129

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2023, respectively, at estimated fair value)

Cemetery perpetual care trust investments (including $ 4,969,005 and $ 3,859,893 for 2023 and 2022 at estimated fair value)

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

$ 4,969,005 for 2024 and 2023, respectively, at estimated fair value)

Receivable from reinsurers

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6,000,000 shares

2,971,854 shares issued and outstanding as

of December 31, 2023 and 2,889,859 shares issued and outstanding as of December 31, 2022

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

Common stock value

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$ 1,430,552,275

Issued and outstanding shares have been adjusted retroactively

for the effect of annual stock dividends.

accompanying notes to consolidated financial statements.

1 unchanged sentence

Statements of Earnings

Ended December 31,

Mortgage fee income

$ 173,499,681

Years Ended December 31,

Insurance premiums and other considerations

$ 119,655,745

$ 114,658,436

Mortgage fee income

Net investment income

Net mortuary and cemetery sales

Gains (losses) on investments and other

Gains on investments and other assets

Total revenues

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Increase in future policy benefits

Amortization of deferred policy and

pre-need acquisition costs and value of business acquired

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

Selling, general and administrative expenses:

Rent and rent related

Depreciation on property

and equipment

Costs related to funding

mortgage loans

Depreciation on property and equipment

Costs related to funding mortgage loans

Interest expense

Cost of goods and services

sold – cemeteries and mortuaries

Total benefits and

Earnings before income

Cost of goods and services sold – cemeteries and mortuaries

Total benefits and expenses

Earnings before income taxes

Income tax expense

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( 1,805,354 )

earnings per Class A equivalent common share (1)

earnings per Class A equivalent common share -

assuming dilution (1)

Weighted average Class A equivalent common

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

outstanding-assuming dilution (1)

(1) Net earnings per

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

The weighted-average shares outstanding includes

the weighted-average Class A common shares and the weighted-average Class C common shares determined on an equivalent Class A common

Net earnings per common share represent net earnings per equivalent Class A common share.

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.

accompanying notes to consolidated financial statements.

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Statements of comprehensive income

Ended December 31,

Other comprehensive income:

Unrealized gains (losses)

on fixed maturity securities available for sale

( 39,331,688 )

Unrealized gains (losses)

on restricted assets

gains (losses) on cemetery perpetual care trust investments

Years Ended December 31,

Other comprehensive income:

(loss), before income tax

( 39,423,169 )

tax benefit (expense)

( 1,643,697 )

comprehensive income (loss), net of income tax

( 31,140,725 )

Comprehensive

income (loss)

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)

( 1,643,697 )

Other comprehensive income (loss), net of income tax

Comprehensive income

accompanying notes to consolidated financial statements.

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Statements of Stockholders’ Equity

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income (Loss)

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Treasury Stock

Balance at December 31, 2022

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$ ( 4,366,651 )

Other comprehensive loss

$ 292,786,927

( 31,140,725 )

Adoption of ASU 2016-13

Other comprehensive income

Stock based compensation expense

Exercise of stock options

Vesting of restricted stock units

Sale of treasury stock

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( 9,005,485 )

Conversion Class C to

Conversion Class C to Class A

Balance at December 31, 2023

1 unchanged sentence

( 5,661,737 )

Balance, value

( 6,885,558 )

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( 8,154,955 )

Conversion Class C to

Conversion Class C to Class A

Balance at December 31, 2024

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$ 338,782,279

Balance, value

$ ( 6,951,266 )

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Statements of Cash Flows

Ended December 31,

Cash flows from operating

Adjustments to reconcile

net earnings to net cash used in operating activities:

Losses (gains) on investments

and other assets

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

( 1,941,898 )

Provision for credit losses

Net amortization of deferred

fees and costs, premiums and discounts

( 1,837,342 )

Provision for credit losses

Net amortization of deferred fees and costs, premiums and discounts

( 1,992,153 )

Provision for deferred

( 2,140,548 )

Provision for deferred income taxes

( 2,495,489 )

Policy and pre-need acquisition

costs deferred

Policy and pre-need acquisition costs deferred

( 21,343,031 )

( 24,432,809 )

Policy and pre-need acquisition

costs amortized

Policy and pre-need acquisition costs amortized

Value of business acquired amortized

Mortgage servicing rights,

( 1,009,312 )

Mortgage servicing rights, additions

( 1,009,312 )

Amortization of mortgage

servicing rights

Net gains on the sale of

mortgage servicing rights

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

( 2,869,729 )

Stock based compensation

Benefit plans funded with

treasury stock

Net change in fair value

of loans held for sale

Originations of loans held

Originations of loans held for sale

( 2,295,830,408 )

( 2,173,080,584 )

Proceeds from sales of

loans held for sale

Proceeds from sales of loans held for sale

2,338,209,587

2,224,454,040

Net gains on sales of loans

held for sale

Net gains on sales of loans held for sale

( 45,383,321 )

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Change in assets and liabilities:

Land and improvements held

Future policy benefits

and unpaid claims

operating assets and liabilities

Land and improvements held for sale

( 1,430,941 )

cash provided by operating activities

Cash flows from investing

Purchases of fixed maturity

Future policy benefits and unpaid claims

Other operating assets and liabilities

( 2,025,510 )

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed maturity securities

( 85,235,694 )

Sales, calls and maturities

of fixed maturity securities

( 70,315,501 )

Sales, calls and maturities of fixed maturity securities

Purchase of equity securities

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Sales of equity securities

Purchases of restricted

Purchases of restricted assets

( 6,039,118 )

Sales, calls and maturities

of restricted assets

Purchases of cemetery perpetual

care trust investments

( 3,065,758 )

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 restricted assets

Purchases of cemetery perpetual care trust investments

( 4,615,717 )

( 1,083,550 )

Payments received for mortgage

loans held for investment, other investments and policy loans

Proceeds from the sale

of mortgage servicing rights

Purchases of property and

Sales, calls and maturities of cemetery perpetual care trust investments

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

( 740,739,575 )

( 645,581,141 )

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

Purchases of property and equipment

( 2,470,032 )

( 1,109,937 )

Sales of property and equipment

2 unchanged sentences

( 22,894,604 )

of real estate

cash provided by (used in) investing activities

Sales of real estate

Net cash provided by (used in) investing activities

( 43,134,064 )

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Statements of Cash Flows (Continued)

Ended December 31,

flows from financing activities:

contract receipts

contract withdrawals

( 15,654,593 )

( 15,795,677 )

from stock options exercised

of treasury stock

Years Ended December 31,

Cash flows from financing activities:

Investment contract receipts

Investment contract withdrawals

( 15,631,260 )

( 15,654,593 )

of bank loans

Proceeds from stock options exercised

Purchase of treasury stock

( 3,053,506 )

( 2,846,447 )

from bank loans

change in warehouse line borrowings for loans held for sale

Repayment of bank loans

( 1,929,346 )

( 69,602,737 )

cash used in financing activities

Proceeds from bank loans

Net change in warehouse line borrowings for loans held for sale

( 55,146,726 )

Net cash used in financing activities

( 4,006,565 )

change in cash, cash equivalents, restricted cash and restricted

cash equivalents

( 62,043,608 )

cash equivalents, restricted cash and restricted cash equivalents at

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 equivalents, restricted cash and restricted cash equivalents

at end of year

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

$ 150,102,620

$ 139,923,399

Disclosure of Cash Flow Information:

paid during the year for:

Cash Investing and Financing Activities:

of loans held for sale to mortgage loans held for investment

from mortgage loans held for investment to restricted assets

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

real estate construction costs and retainage

loans held for investment foreclosed into real estate held for investment

assets obtained in exchange for operating lease liabilities

assets obtained in exchange for finance lease liabilities

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

Reconciliation

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in the table below:

Ended December 31,

Years Ended December 31,

Cash and cash equivalents

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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

$ 150,102,620

$ 139,923,399

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

$ 150,102,620

$ 139,923,399

accompanying notes to consolidated financial statements.

2 unchanged sentences

Ended December 31, 2024 and 2023

Significant Accounting Policies

1) Significant

Accounting Policies

Overview of Business

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consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries.

intercompany transactions and accounts have been eliminated in consolidation.

All intercompany

transactions and accounts have been eliminated in consolidation.

of the Company has made several estimates and assumptions related to the reported amounts of assets and liabilities, reported amounts

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Actual results could differ from those estimates.

estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of

derivative assets and liabilities;

estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative

assets and liabilities;

those used in determining deferred acquisition costs and the value of business acquired;

used in determining the value of mortgage loans foreclosed to real estate held for investment or sale;

those used in determining the

liability for future policy benefits and unearned revenue;

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

those used in determining the value of mortgage servicing rights;

those used in determining

the liability for future policy benefits;

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

used in determining allowances for credit losses;

those used in determining loan loss reserve;

and those used in determining

deferred tax assets and liabilities.

Although some variability is inherent in these estimates, management believes the amounts

provided are fairly stated in all material respects.

and those used in determining loan

loss reserve.

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

all material respects.

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

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

Depreciation is not recognized on real estate classified as held

Depreciation is not recognized on real

estate classified as held for sale.

investments and policy loans are carried at the aggregate unpaid balances, less allowances for credit losses.

investment income refers to earned income from investments that has not yet been received by the Company.

investment income refers to the income earned from investments that has not yet been received by the Company.

(losses) on investments (except for equity securities carried at fair value through net earnings) arise when investments are sold

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Significant Accounting Policies (Continued)

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

loans held for sale.

All revenues and costs are recognized when the mortgage loan is funded and any changes in fair value are shown as

a component of mortgage fee income.

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

loans held for sale.

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

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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 the long-term investment portfolio at the lower of cost or fair value and previously recorded

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.

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

value is often difficult to determine and may contain significant unobservable inputs, but is based on the following:

value is often difficult to determine and may contain significant unobservable inputs, but is based on the following guidelines:

loans that are committed, the Company uses the commitment price.

1 unchanged sentence

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

Company uses the market value for the similar product.

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

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

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

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

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

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

1 unchanged sentence

of the loan, thus minimizing credit losses.

loans originated are sold to third-party investors.

The amounts expected to be sold to investors are shown on the consolidated balance

sheets as loans held for sale.

Most loans originated are sold to third-party investors.

The amounts expected to be sold

to investors are shown on the consolidated balance sheets as loans held for sale.

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

loans held for sale.

All revenues and costs are recognized when the mortgage loan is funded and any changes in fair value are shown as

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

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.

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

incurred in a sale relating to any guarantee or recourse provisions.

The Company accrues a monthly allowance for indemnification losses

to investors based on total production.

This estimate is based on the Company’s historical experience and is included as a component

of mortgage fee income.

Subsequent updates to the recorded liability from changes in assumptions are recorded in selling, general and

administrative expenses as a component of provision for loan loss reserve.

The estimated liability for indemnification losses is included

in other liabilities and accrued expenses.

incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representation and warranties made

at loan sale.

The Company accrues a monthly allowance for indemnification losses to investors based on total production.

This estimate

is based on the Company’s historical experience and is included as a component of mortgage fee income.

Subsequent updates to the

recorded liability from changes in assumptions are recorded in selling, general and administrative expenses as a component of provision

for loan loss reserve.

The estimated liability for indemnification losses is included in other liabilities and accrued expenses.

loan loss reserve analysis involves mortgage loans that have been sold to third-party investors, which were believed to have met investor

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investor and by loan product type.

Company believes the allowance for loan losses and the loan loss reserve represent probable loan losses incurred as of the balance sheet

Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date.

information related to the Loan Loss Reserve is included in Note 3.

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a sale of that lot is met.

Policy Acquisition Costs and Value of Business Acquired

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

17 unchanged sentences

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

19 unchanged sentences

when mortgage loans are sold.

Under these contracts, the Company is obligated to retain and provide loan servicing functions on loans

sold, in exchange for fees and other remuneration.

The servicing functions typically performed include, among other responsibilities,

collecting and remitting loan payments;

Under these contracts, the Company retains and provides loan servicing functions on loans sold, in exchange

for fees and other remuneration.

The servicing functions typically performed include, among other responsibilities, collecting and remitting

loan payments;

responding to borrower inquiries;

accounting for principal and interest, holding custodial (impound)

funds for payment of property taxes and insurance premiums;

accounting for principal and interest, holding custodial (impound) funds for payment

of property taxes and insurance premiums;

counseling delinquent mortgagors;

and supervising the acquisition of real

estate owned and property dispositions.

and supervising the acquisition of real estate owned and

property dispositions.

total residential mortgage loans serviced for others consist primarily of agency conforming fixed-rate mortgage loans.

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mortgage-backed securities (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate of the

probability that the mortgage loan will fund within the terms of the commitment.

The change in fair value of the underlying mortgage

loan is measured from the date the loan commitment is issued and is shown net of expenses.

Following issuance, the value of a loan commitment

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

Fallout rates and other factors

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

terms of the commitments.

probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense.

The change in fair

value of the underlying mortgage loan is measured from the date the loan commitment is issued and is shown net of related expenses.

issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage

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

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

NATIONAL FINANCIAL CORPORATION

5 unchanged sentences

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

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

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

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

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

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

7 unchanged sentences

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

Call and put options are shown in other liabilities

and accrued expenses on the condensed consolidated balance sheets.

Call and put options were shown in other liabilities

and accrued expenses on the consolidated balance sheets.

for Credit Losses

The Company records

allowances for current expected credit losses from fixed maturity securities available for sale, mortgage loans held for investment, other

investments, and receivables in accordance with GAAP.

The allowances for credit losses are valuation accounts that are reported as a reduction

of the financial asset’s cost basis and are measured on a pool basis when similar risk characteristics exist.

The Company estimates

allowances for credit losses using relevant available information from both internal and external sources.

The Company considers its historical

loss experience, analyzes current market conditions and forecasts and uses third-party assistance to arrive at current expected credit

Company records allowances for current expected credit losses from fixed maturity securities available for sale, mortgage loans held

for investment, other investments, and receivables in accordance with GAAP.

The allowances for credit losses are valuation accounts that

are reported as a reduction of the financial asset’s cost basis and are measured on a pool basis when similar risk characteristics

The Company estimates allowances for credit losses using relevant available information from both internal and external sources.

The Company considers its historical loss experience, analyzes current market conditions and forecasts and uses third-party assistance

to arrive at current expected credit losses.

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.

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, mortality, morbidity, withdrawals, and other assumptions based on the life insurance subsidiaries’ experience, 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

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.

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.

Increases in future policy benefits are charged to expense.

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.

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

10 unchanged sentences

period when claims were incurred.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Significant Accounting Policies (Continued)

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.

Participating

3 unchanged sentences

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

The amounts to be paid are determined by the Board

of Directors.

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

1 unchanged sentence

of Insurance Premiums and Other Considerations

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

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

benefits and consist principally of whole life insurance policies, limited payment life insurance policies, and certain annuities with

2 unchanged sentences

policies (which include universal life policies, interest-sensitive life policies, deferred annuities, and annuities without life contingencies)

are recognized when earned and consist of amounts assessed against policyholder account balances during the period for policy administration

charges and surrender charges.

are reflected as increases in liabilities for policyholder account balances and not as revenues.

Revenues reported for these products

consist of policy charges for the cost of insurance, administration charges, amortization of policy initiation fees and surrender charges

assessed against policyholder account balances.

Surrender benefits paid relating to these products are reflected as decreases in liabilities

for policyholder account balances and not as expenses.

The Company receives investment income earned from the funds deposited into account

balances, a portion of which is passed through to the policyholders in the form of interest credited.

Interest credited to policyholder

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

the consolidated financial statements.

Company follows the procedure of reinsuring risks of more than $ 100,000 to provide for greater diversification of business to allow management

4 unchanged sentences

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

14 unchanged sentences

and prearranged funeral services, are deferred until the merchandise is delivered or services are performed.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Significant Accounting Policies (Continued)

and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured and

22 unchanged sentences

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Significant Accounting Policies (Continued)

taxes include taxes currently payable plus deferred taxes.

7 unchanged sentences

merits of the positions.

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Significant Accounting Policies (Continued)

Deferred tax assets and liabilities require various estimates and judgments and may be affected favorably or

unfavorably by various internal and external factors.

Factors affecting the deferred tax assets and liabilities include, but are not

limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes

to overall levels of pre-tax earnings.

Changes in these estimates, judgments or factors may result in an increase or decrease to the

Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes.

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

Per Common Share

26 unchanged sentences

Standards Adopted in 2024

“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

11 unchanged sentences

losses increased (decreased) by the following amounts.

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

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

Mortgage loans held for investment:

$ ( 192,607 )

Residential construction

Restricted assets - mortgage loans held for

Cemetery perpetual care trust investments -

mortgage loans held for investment:

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

7 unchanged sentences

required disclosures.

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

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

Company commencing on January 1, 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 Company is in the process of estimating the impact

of the new guidance on the consolidated financial statements.

In November 2020, ASU No.

“Financial Services – Insurance (Topic 944):

Effective Date and

Early Application,” was issued.

This ASU was issued to provide additional time for the implementation of ASU No.

2018-12 by deferring

the effective date by one year.

For smaller reporting companies, this update is effective for annual reporting periods beginning after

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.

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” — Issued in December 2023, ASU 2023-09 requires that public business entities,

on an annual basis:

(i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling

items that meet a quantitative threshold.

In addition, the amendments in this update require that all entities disclose on an annual

basis the following information about income taxes paid:

(i) the amount of income taxes paid (net of refunds received) disaggregated

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

jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net

of refunds received).

ASU 2023-09 is effective for the Company beginning on January 1, 2025.

The Company is in the process of estimating

the impact of the new guidance on the consolidated financial statements.

“Segment Reporting (Topic

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

(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

ASU 2023-07 is effective for the Company for annual periods beginning January 1, 2024 and interim periods beginning January

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

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

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

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

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

In addition, the amendments in this update require

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

(i) the amount of income taxes paid

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

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

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

ASU 2023-09 is effective for the Company 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.

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

Disaggregation

of Income Statement Expenses” — Issued in November 2024, ASU 2024-03 requires public business entities to disclose, in

the notes to the consolidated financial statements, specified information about certain expenses at each interim and annual reporting

ASU 2024-03 requires disclosures about specific types of expenses (i.e., (a) purchases of inventory, (b) employee compensation,

(c) depreciation and (d) intangible asset amortization) included in the expense captions presented on the face of the statement of earnings

as well as disclosures about selling expenses.

ASU 2024-03 does not change the requirements for the presentation of expenses on the statement

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning

after December 15, 2027.

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.

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

4 unchanged sentences

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

of Investments

Schedule of Investments

Unrealized Gains

1 unchanged sentence

for Credit 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

$ ( 486,976 )

$ ( 1,416,448 )

$ 110,378,730

Obligations of states and

political subdivisions

Corporate securities including

public utilities

of states and political subdivisions

securities including public utilities

( 6,922,871 )

Mortgage-backed securities

Mortgage-backed

( 4,244,640 )

Redeemable preferred stock

preferred stock

fixed maturity securities available for sale

3 unchanged sentences

$ 366,546,129

Equity securities at estimated fair value:

Equity securities at estimated

Common stock:

Industrial, miscellaneous

and all other

miscellaneous and all other

$ ( 591,340 )

1 unchanged sentence

$ ( 591,340 )

Mortgage loans held for investment at amortized

$ 103,153,587

Residential construction

Unamortized deferred

loan fees, net

Mortgage loans held for investment

at amortized cost:

Unamortized deferred loan fees, net

( 2,082,241 )

Allowance for credit

Allowance for credit losses

( 1,885,390 )

Net discounts

Total mortgage loans

held for investment

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:

real estate held for investment

$ 197,693,338

Real estate held for sale:

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

real estate held for sale

Other investments and policy

loans at amortized cost:

Home Loan Bank stock (2)

Allowance for credit losses for insurance assignments

( 1,536,926 )

Total policy loans and

other investments

Accrued investment

Total investments

policy loans and other investments

investment income

$ 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.

(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.

NATIONAL FINANCIAL CORPORATION

5 unchanged sentences

Unrealized Losses (1)

Fixed maturity securities, available for sale,

at estimated fair value:

Treasury securities and obligations

for Credit Losses

Fixed maturity securities,

available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Government agencies

$ 111,450,753

Obligations of states and political subdivisions

Corporate securities including public utilities

$ ( 1,416,448 )

Mortgage-backed securities

$ 110,378,730

Redeemable preferred

Total fixed maturity

securities available for sale

of states and political subdivisions

securities including public utilities

( 7,145,507 )

Mortgage-backed

( 4,702,905 )

preferred stock

fixed maturity securities available for sale

$ 390,884,441

Equity securities at estimated fair value:

$ ( 13,584,120 )

$ ( 314,549 )

$ 381,535,986

Equity securities at estimated

Common stock:

2 unchanged sentences

$ ( 439,575 )

Total equity securities

at estimated fair value

equity securities at estimated fair value

$ ( 439,575 )

Mortgage loans held for investment at amortized

Residential construction

Mortgage loans held for investment

at amortized cost:

$ 103,153,587

Unamortized deferred loan fees, net

( 1,623,226 )

Allowance for loan losses

Allowance for credit losses

( 3,818,653 )

Net discounts

Total mortgage loans

held for investment

Total mortgage loans held

for investment

$ 275,616,837

Real estate held for investment - net of

accumulated depreciation:

Total real estate

held for investment

Real estate held for investment

- net of accumulated depreciation:

Total real estate held

for investment

$ 183,419,292

Real estate held for sale:

Total real estate

held for sale

Other investments and policy loans at amortized

Insurance assignments

Federal Home Loan Bank stock (1)

Other investments

Allowance for

doubtful accounts

Total real estate held

Other investments and policy

loans at amortized cost:

Home Loan Bank stock (2)

Allowance for credit losses for insurance assignments

( 1,553,836 )

Total policy loans and

other investments

Accrued investment

Total policy loans and other

Accrued investment income

Total investments

$ 936,812,566

(1) Gross unrealized

losses are net of allowance for credit losses

(2) Includes $ 530,900

9 unchanged sentences

as of December 31, 2024 and 2023.

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

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

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

Losses for Less than Twelve Months

2 unchanged sentences

At December 31,

Treasury securities and obligations

securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage and other asset-backed

Total unrealized losses

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Mortgage-backed

$ 122,136,098

1 unchanged sentence

At December 31,

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

Mortgage and other asset-backed

Total unrealized losses

Obligations of states and

political subdivisions

Corporate securities including

public utilities

Mortgage-backed

$ 205,910,291

2 unchanged sentences

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

Credit loss provision (release) of $ 325,314 and nil have been recognized for 2023 and 2022, respectively.

Credit losses are

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

Other unrealized losses

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

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.

NATIONAL FINANCIAL CORPORATION

25 unchanged sentences

that relates to the expected credit loss is recognized as a loss in earnings, included in gains (losses) on investments and other assets

on the condensed consolidated statements of earnings.

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

1 unchanged sentence

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

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

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

The recognized

3 unchanged sentences

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

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

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 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.

NATIONAL FINANCIAL CORPORATION

10 unchanged sentences

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.

of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

NAIC Designation

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

$ 188,386,980

6 unchanged sentences

$ 381,275,986

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

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

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

Ended December 31, 2024

2 unchanged sentences

of states and political subdivisions

including public utilities

securities including public utilities

Mortgage-backed

Beginning balance - December 31,

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

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

Ending Balance - December

3 unchanged sentences

Investments (Continued)

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

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

of Earnings on Fixed Maturity Securities

Balance of credit-related OTTI

Additions for credit impairments recognized

Securities not previously

Securities previously impaired

Reductions for credit impairments previously

recognized on:

Securities that matured

or were sold during the period (realized)

Securities due to an increase

in expected cash flows

Balance of credit-related

OTTI at December 31

Ended December 31, 2023

Treasury securities and obligations of U.S.

Government agencies

of states and political subdivisions

securities including public utilities

Mortgage-backed

Beginning balance - December 31, 2022

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

Ending Balance - December

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

2 unchanged sentences

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

of Investments Classified by Contractual Maturity Date

Schedule of Investments Classified by Contractual Maturity Date

Estimated Fair

4 unchanged sentences

Mortgage-backed securities

Redeemable preferred

preferred stock

$ 376,012,071

1 unchanged sentence

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

of Major Categories of Net Investment Income

Schedule of Major Categories of Net Investment Income

Ended December 31,

Proceeds from sales

Proceeds from

Gross realized gains

6 unchanged sentences

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

of Assets on Deposit With Life Insurance

Schedule of Assets on Deposit With Life Insurance

Ended December 31,

Fixed maturity securities available

at estimated fair value

Fixed maturity

securities available for sale at estimated fair value

Other investments

Cash and cash equivalents

and cash equivalents

assets on deposit

1 unchanged sentence

Ended December 31,

Fixed maturity securities available

at estimated fair value

Cash and cash equivalents

Fixed maturity

securities available for sale at estimated fair value

and cash equivalents

assets on deposit

7 unchanged sentences

Fixed maturity

securities available for sale

at estimated fair value

assets pledged as collateral

securities available for sale at estimated fair value

Total assets pledged as collateral

Estate Held for Investment and Held for Sale

5 unchanged sentences

Real Estate Held for Investment and Held for Sale

Company owns and manages commercial real estate assets as a means of generating investment income.

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 Board of Directors.

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.

NATIONAL FINANCIAL CORPORATION

6 unchanged sentences

or through strategic lease-up periods.

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

in employment and population and that provide operational efficiencies.

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

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.

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

These properties include office buildings, flex office

15 unchanged sentences

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

of Commercial Real Estate Investment

Schedule of Commercial Real Estate Investment

Net Book Value

Total Square Footage

$ 126,056,342

$ 142,475,177

Mississippi (2)

$ 126,074,928

1 unchanged sentence

(1) Includes Center53

(2) This property was

moved to held for sale

(1) Consists of approximately

93 acres of undeveloped land for $ 151,553 .

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

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

Initial lease terms generally range

from three to ten years .

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Investments (Continued)

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

Initial lease terms generally range

from three to ten years.

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

2 unchanged sentences

Net Book Value

Total Square Footage

Mississippi (1)

of approximately 93 acres of undeveloped land for $ 151,553 for 2023 and 2022.

The remaining property for $ 2,877,420

was sold in February 2024 for a gain of approximately $ 250,000 .

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

(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 .

Real Estate Held for Investment and Held for Sale

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

The Company has the option

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

The Company also invests in residential

subdivision development.

Company occasionally acquires residential homes through the mortgage loan foreclosure process.

The Company has the option to sell these

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.

2 unchanged sentences

residential property portfolio.

2023 and 2022, the Company recorded impairment losses on residential real estate held for sale of nil and $ 94,000 , respectively.

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

2024 and 2023, the Company did not record any impairment losses on residential real estate held for investment or held for sale.

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

2024 and 2023, the Company recorded depreciation expense on residential real estate held for investment of $ 10,611 and $ 10,592 , respectively.

7 unchanged sentences

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

of Residential Real Estate Investment

Schedule of Residential Real Estate Investment

Net Book Value

(1) Includes multiple

residential subdivision development projects

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 for sale

Lots available

Lots to be developed

2 unchanged sentences

Net Book Value

$ 11,010,029 (1)

(1) All sold in 2023

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

as of December 31, 2023 and 2022, respectively.

net book value of foreclosed residential real estate included in residential real estate held for investment or sale was $ 1,126,480 and

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

NATIONAL FINANCIAL CORPORATION

6 unchanged sentences

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

of Real Estate Owned and Occupied by the Company

Schedule of Real Estate Owned and Occupied by the Company

Business Segment

Square Footage

Footage Occupied by the Company

433 Ascension Way, Floors 4, 5

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

Corporate Offices, Life Insurance,

Cemetery/Mortuary Operations, and Mortgage Operations and Sales

1044 River Oaks Dr., Flowood, MS (1) (3)

Life Insurance Operations

1818 Marshall Street, Shreveport, LA (2)

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

909 Foisy Street, Alexandria, LA (2) (4)

Life Insurance Sales

812 Sheppard Street, Minden, LA (2) (5)

Life Insurance Sales

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

812 Sheppard Street, Minden,

Life Insurance Sales

4 unchanged sentences

(3) Listed for sale

and sold during the first quarter of 2024

(4) Listed for sale

and currently under contract

(5) Listed for sale

Loans Held for Investment

8 unchanged sentences

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

As of December 31, 2023, the Company had 44 %, 11 %, 10 %, 7 %

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

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

California, and Texas, respectively.

As of 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, 2023,

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

and Arizona, respectively.

of Allowance for Credit Losses

5 unchanged sentences

mortgage loans held for investment.

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

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Investments (Continued)

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

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

1 unchanged sentence

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

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

Payments received

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

The interest income recognized from payments received for mortgage

loans on a non-accrual status was immaterial.

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

Payments received for mortgage

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

The interest income recognized from payments received for mortgage loans

on a non-accrual status was immaterial.

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

Interest not accrued

on these loans totaled approximately $ 237,000 and $ 226,000 as of December 31, 2023 and 2022, respectively.

Interest not accrued on these

loans totaled approximately $ 244,000 and $ 237,000 as of December 31, 2024 and 2023, respectively.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Investments (Continued)

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 for foreclosure are expensed as incurred.

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.

9 unchanged sentences

guarantor’s) ability to repay.

Commercial loans are evaluated for credit loss by

analyzing common metrics that are predictors for future credit losses such as debt service coverage ratio (“DSCR”), loan to

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

The fair value of the underlying collateral

is based on a third-party appraisal of the property at origination of the loan.

The fair value is assessed if the loan becomes 90 days

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

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

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

value is assessed if the loan becomes 90 days delinquent.

The Company uses these metrics to pool similar loans.

The allowance for credit losses is based on estimates, historical experience,

probability of loss, value of the underlying collateral, and other factors that affect the collectability of the loan.

The Company applies

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

The allowance for credit

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

affect the collectability of the loan.

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

the allowance for credit losses.

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

The borrower’s ability to repay is

sensitive to the 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.

Residential loans are evaluated

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

Among other things, the Company uses

its historical delinquency information and considers current and forecasted economic conditions.

External sources include a monthly analysis

of its residential portfolio by a third party.

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

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

The models consider loan features such as loan type, loan to value,

payment status, age, and current property values.

Analyzing the information from the various sources allows the Company to arrive at the

allowance for credit losses.

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.

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

Among other things,

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

External sources include

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

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

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

The models consider loan features such as

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

Analyzing the information from the various sources allows

the Company to arrive at the allowance for credit losses.

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

13 unchanged sentences

Investments (Continued)

Residential 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.

per loan basis point is reviewed at least annually or as loan losses or market trends require.

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

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

The per loan basis point is reviewed

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

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

of Allowance for Loan Losses

Schedule of Allowance for Loan Losses

December 31, 2024

2 unchanged sentences

Adoption of ASU 2016-13

Change in provision for

credit losses (2)

in provision for credit losses (2)

( 1,095,485 )

Ending balance - December

2 unchanged sentences

Beginning balance - January 1, 2023

Change in provision for

credit losses (2)

Adoption of ASU 2016-13

in provision for credit losses (2)

Ending balance - December

8 unchanged sentences

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

of Aging of Mortgage Loans

Schedule of Aging of Mortgage Loans

December 31, 2024

30-59 days past

60-89 days past due

Over 90 days past due (1)

process of foreclosure (1)

of foreclosure (1)

mortgage loans

1 unchanged sentence

( 1,885,390 )

( 2,390,894 )

( 3,818,653 )

Unamortized deferred loan

9 unchanged sentences

Over 90 days past due (1)

process of foreclosure (1)

of foreclosure (1)

mortgage loans

2 unchanged sentences

( 2,390,894 )

( 3,818,653 )

Unamortized deferred loan

5 unchanged sentences

$ 275,616,837

(1) Interest income is not recognized

on loans which are more than 90 days past due or in foreclosure.

(1) Interest income

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

NATIONAL FINANCIAL CORPORATION

8 unchanged sentences

December 31, 2024:

of Commercial Mortgage Loans By Credit Quality Indicator

Schedule of Commercial Mortgage Loans By Credit Quality Indicator

Quality Indicator

2 unchanged sentences

1.00x - 1.20x

9,174,841 (1) (1)

(1) Commercial construction loan

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Investments (Continued)

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

5 unchanged sentences

Quality Indicator

Performance Indicators:

Non-performing (1)

$ 103,153,587

(1) Includes residential mortgage loans in the process of foreclosure of $ 1,021,790

(1) Includes residential

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

Less than 65%

Greater than 80%

$ 103,153,587

NATIONAL FINANCIAL CORPORATION

10 unchanged sentences

Quality Indicator

Performance Indicators:

$ 118,863,944

$ 151,172,733

Non-performing

$ 118,863,944

$ 151,172,733

Less than 65%

1 unchanged sentence

$ 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.

of Mortgage loans Held for Investment

$ 103,153,587

Schedule of Mortgage loans Held for Investment

Residential Construction

1 unchanged sentence

$ 140,340,584

$ 106,523,736

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Investments (Continued)

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

balance sheets:

of Aging of Insurance Assignments

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

Ended December 31,

30-59 days past

60-89 days past due

90 days past due

Over 90 days past due

Total past due

Total insurance assignments

Allowance for credit

insurance assignments

for credit losses

( 1,536,926 )

( 1,553,836 )

Net insurance assignments

insurance assignments

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

3 unchanged sentences

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

of Allowance for Credit Losses

Schedule of Allowance for Credit Losses

Beginning balance - January 1, 2024

Change in provision for

credit losses (1)

in provision for credit losses (1)

( 1,050,187 )

Ending balance - December

Beginning balance - January 1, 2023

Change in provision for

credit losses (1)

in provision for credit losses (1)

Ending balance - December

(1) Included in other expenses on the

consolidated statements of earnings

(1) Included in other

expenses on the consolidated statements of earnings

NATIONAL FINANCIAL CORPORATION

5 unchanged sentences

from investments and other assets.

of Gain (Loss) on Investments

Schedule of Gain (Loss) on Investments

Ended December 31

Fixed maturity securities available for

Gross realized

Gross realized losses

Net credit loss (provision)

Fixed maturity securities

available for sale:

realized gains

realized losses

loss (provision) release

Equity securities:

Gains (losses) on securities

Unrealized gains (losses)

on securities held at the

end of the period

( 2,109,556 )

Real estate held for investment and sale:

Gross realized gains

Gross realized losses

Other assets, including call and put option

Gross realized gains

(losses) on securities sold

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

Mortgage loans held for

realized gains

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

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

1 unchanged sentence

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

and mortuaries of $ 730,000 in

net gains and $ 817,000 in

net losses for 2023 and 2022, respectively.

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

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Investments (Continued)

Major categories of net investment income were as follows:

categories of net investment income were as follows:

Ended December 31

Fixed maturity securities available

Fixed maturity

securities available for sale

Equity securities

Mortgage loans held for investment

Real estate held for investment and sale

Real estate held for investment

Insurance assignments

Other investments

Cash and cash equivalents

and cash equivalents

Gross investment income

Investment expenses

( 16,034,968 )

( 16,976,162 )

Net investment income

investment income

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

5 unchanged sentences

investment income consists of the following:

of Accrued Investment Income

Schedule of Accrued Investment Income

Ended December 31,

Fixed maturity securities available for sale

Fixed maturity

securities available for sale

Equity securities

1 unchanged sentence

Real estate held for investment

Cash and cash equivalents

Total accrued investment income

and cash equivalents

accrued investment income

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

Loans Held for Sale

4 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 $ 1,636,090 and

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

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

disclosures regarding loans held for sale.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Loans Held for Sale (Continued)

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.

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 loss

Unrealized gain (loss)

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

5 unchanged sentences

Secondary gains

153,870,807 (1)

Change in fair value of loan commitments

( 1,123,615 )

( 4,308,638 )

Change in fair value of loans held for sale

( 8,834,797 )

Provision for loan

Change in fair value of loan

( 1,123,615 )

Mortgage fee income

Change in fair value of loans

held for sale

for loan loss reserve

$ 107,558,640

(1) Includes a net gain of $ 34,051,938

for the sale of mortgage servicing rights

NATIONAL FINANCIAL CORPORATION

18 unchanged sentences

Provision for current loan originations (1)

Charge-offs, net of

recaptured amounts

( 1,205,598 )

Charge-offs, net of recaptured

( 1,205,598 )

1 unchanged sentence

(1) Included in Mortgage

fee income on the consolidated statements of earnings

Company maintains reserves for estimated losses on current production volumes.

1 unchanged sentence

4.1 basis points per loan, the equivalent of $ 410 per $ 1,000,000 in loans originated.

This is a decrease over 2022, when $ 1,078,812 in

reserves were added at a rate of 3.19 basis points per loan originated, the equivalent of $ 319 per $ 1,000,000 in loans originated.

Company monitors market data and trends, economic conditions (including forecasts) and its own experience to maintain adequate loss reserves

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.

3 unchanged sentences

consist of the following:

Schedule of Receivables

Schedule of Receivable

Contracts with customers

1 unchanged sentence

Total receivables

Allowance for credit

Allowance for credit losses

( 1,678,531 )

13 unchanged sentences

Ending balance - December 31, 2023

(1) Included in other

expenses on the condensed consolidated statements of earnings

( 1) Included

in other expenses on the consolidated statements of earning s

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

Value of Business Acquired, Goodwill and Other Intangible Assets

regarding value of business acquired was as follows:

regarding the value of business acquired was as follows:

Schedule of Value of Business Acquired

at beginning of year

Value of business

Value of business acquired

Imputed interest at 7 % included in earnings

2 unchanged sentences

( 1,926,668 )(1)

amortization included in other

Shadow amortization

included in other

comprehensive income

2 unchanged sentences

Balance at end of

(1) Included in Amortization

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

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:

of Acquisitions Net Amortization Charged to Income

Schedule of Acquisitions Net Amortization Charged to Income

amortization may vary based on changes in assumptions or experience.

22 unchanged sentences

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

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

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

3 unchanged sentences

Intangible asset - customer lists (2)

Less accumulated

Less accumulated amortization

( 1,131,333 )

Balance at end of

(1) Rivera Funerals,

Cremations and Memorial Gardens

(2) Kilpatrick Life

(3) Beta Capital Corp

expense for 2023 and 2022 was $ 254,000 and $ 256,000 , respectively, and is included in other expenses on the consolidated statements 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:

8 unchanged sentences

Furniture and equipment

Property and equipment,

Less accumulated

Property and equipment, gross

Less accumulated depreciation

( 14,146,001 )

5 unchanged sentences

2023 on a property held by the life segment.

This property is listed for sale and currently under contract.

Impairment losses are included

in gains (losses) on the consolidated statements of earnings.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

This property was sold in 2024.

Impairment losses are included in gains (losses) on the

consolidated statements of earnings.

Bank and Other Loans Payable

1 unchanged sentence

Summary of Bank Loans Payable

Prime rate note

payable in monthly installments of $ 75,108 including principal and interest, collateralized by shares of Security National Life

Insurance Company stock, paid in full in

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 $ 62,977,000 , due

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

3 unchanged sentences

1 month SOFR rate plus 2 % loan purchase agreement

with a warehouse line availability of $ 100,000,000 , expired December 2023 due to the lender exiting the market place.

1 month SOFR rate plus 2 % loan purchase agreement

with a warehouse line availability of $ 100,000,000 , matures November 2024.

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 $ 75,000,000 , expired December 2023 due to the lender exiting the market place.

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 May 2024.

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

Finance lease liabilities

39 unchanged sentences

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 March 31, 2024 , renewable annually.

As of December 31, 2023 , the

Company was contingently liable under standby letters of credit aggregating $ 38,290 , to be used as collateral for residential subdivision

land development.

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, 2023, there were no amounts outstanding under

the revolving line-of-credit.

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

a mandatory .10% credit spread adjustment, maturing March 31, 2024 .

As of December 31, 2023, the Company was contingently liable under

standby letters of credit aggregating $ 1,250,000 , to be used as collateral for SecurityNational Mortgage’s state licensing.

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.

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

2 unchanged sentences

Bank and Other Loans Payable (Continued)

Covenants for Mortgage Warehouse Lines of Credit

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

This agreement allows SecurityNational

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

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

The Company is required

to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any

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

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

This agreement allows SecurityNational

Mortgage to borrow up to $ 15,000,000 for the sole purpose of funding mortgage loans (the “U.S.

Bank Warehouse Line of Credit”

and, together with the Texas Capital Bank Warehouse Line of Credit, the “Warehouse Lines of Credit”).

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

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 May 26, 2024 .

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

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

agreements for the warehouse lines of credit include cross default provisions where certain events of default under other of SecurityNational

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, 2023, the Company was

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

letter of credit with its primary bank.

SecurityNational Mortgage has received or is in the process of receiving waivers under the warehouse

lines of credit from the warehouse banks.

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

$ 7,732,000 on the warehouse line of credit that has not provided a covenant waiver, the Company has sufficient cash and borrowing capacity

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

The Company has performed an

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

to continue its business model.

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

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.

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.

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Bank and Other Loans Payable (Continued)

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

1 unchanged sentence

$ 106,740,104

expense in 2023 and 2022 was $ 4,865,327

and $ 7,830,443 ,

respectively.

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

NATIONAL FINANCIAL CORPORATION

11 unchanged sentences

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

of Investments

of Investments and Obligation

Unrealized Gains

Unrealized Losses

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

of states and political subdivisions

securities including public utilities

fixed maturity securities available for sale

securities at estimated fair value:

miscellaneous and all other

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous

and all other

$ ( 226,007 )

1 unchanged sentence

$ ( 226,007 )

loans held for investment at amortized cost:

Mortgage loans held for investment at amortized

Residential construction

Allowance for

credit losses

Allowance for credit losses

mortgage loans held for investment

and cash equivalents

cemetery perpetual care trust investments

perpetual care obligation

Total mortgage loans

held for investment

Cash and cash equivalents

Accrued investment income

Total cemetery perpetual

care trust investments

Cemetery perpetual

care obligation

$ ( 5,642,693 )

investments in excess of trust obligations

Trust investments

in excess of trust obligations

NATIONAL FINANCIAL CORPORATION

9 unchanged sentences

Government agencies

of states and political subdivisions

Obligations of states and

political subdivisions

securities including public utilities

fixed maturity securities available for sale

8 unchanged sentences

Residential construction

Real estate held

for investment:

Allowance for credit losses

Total mortgage loans

held for investment

Cash and cash equivalents

10 unchanged sentences

The unrealized losses were primarily related to interest rate fluctuations.

The tables set

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

of Fair Value of Fixed Maturity Securities

The tables set forth unrealized

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

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

4 unchanged sentences

Government agencies

Obligations of states and political subdivisions

Corporate securities

including public utilities

Obligations of states

and political subdivisions

Total unrealized losses

2 unchanged sentences

Government agencies

Obligations of states

and political subdivisions

Obligations of states and political subdivisions

Corporate securities including

public utilities

Total unrealized losses

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

were five securities with fair values aggregating 96.4 % of aggregate amortized cost as of December 31, 2022.

No credit losses have been

recognized for 2023 and 2022, since the increase in unrealized losses is primarily a result of increases in interest rates.

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

available for sale.

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

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.

table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of December 31, 2024,

2 unchanged sentences

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual

Maturity Date

Schedule of Investments Classified by Contractual Maturity Date

Estimated Fair

2 unchanged sentences

Due in 5-10 years

Due in more than 10

Due in more than 10 years

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2024 and 2023

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

29 unchanged sentences

held for investment

Other investments

Cash and cash equivalents

Accrued investment income

Total restricted

(1) Including cash

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

(1) Including cash and cash equivalents

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

NATIONAL FINANCIAL CORPORATION

7 unchanged sentences

at estimated fair value:

of states and political subdivisions

securities including public utilities

fixed maturity securities available for sale

Treasury securities and obligations

Government agencies

Obligations of states and political subdivisions

Corporate securities including

public utilities

Total fixed maturity

securities available for sale

Equity securities at estimated fair value:

3 unchanged sentences

$ ( 247,996 )

equity securities at estimated fair value

Total equity securities

at estimated fair value

$ ( 247,996 )

Mortgage loans held for investment at amortized cost:

and cash equivalents (1)

Mortgage loans held for investment at amortized

Residential construction

Allowance for

credit losses

Total mortgage loans

held for investment

Cash and cash equivalents

Total restricted

6 unchanged sentences

The unrealized losses were primarily related to interest rate fluctuations.

The tables set

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

of Fair Value of Fixed Maturity Securities

The tables set forth unrealized

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

Schedule of Fair Value of Fixed Maturity Securities

Losses for Less than Twelve Months

5 unchanged sentences

Obligations of states and political subdivisions

Corporate securities

including public utilities

Corporate securities including

public utilities

Total unrealized losses

At December 31, 2023

Treasury securities and obligations of

Government agencies

Obligations of states and political subdivisions

Corporate securities

including public utilities

Corporate securities including

public utilities

Total unrealized losses

12 unchanged sentences

or prepay obligations with or without call or prepayment penalties.

Schedule of Investments Classified by Contractual

Maturity Date

Schedule of Investments Classified by Contractual Maturity Date

Estimated Fair

2 unchanged sentences

Due in 5-10 years

Due in more than 10

Due in more than 10 years

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

4 unchanged sentences

Summary of Income Tax Liability

components of the Company’s deferred tax assets and liabilities are approximately as follows:

$ ( 725,175 )

significant components of the Company’s deferred tax assets and liabilities are approximately as follows:

Schedule of Deferred Tax Assets and Liabilities

Future policy benefits

Loan loss reserve

Loan loss reserve and allowances

Unearned premium

2 unchanged sentences

Tax on unrealized appreciation

Valuation allowance

( 1,506,144 )

Total deferred tax assets

3 unchanged sentences

Deferred gains

Tax on unrealized appreciaton

Total deferred tax liabilities

Net deferred tax liability

valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization.

Prior period amounts have been adjusted to conform to the

current period presentation.

NATIONAL FINANCIAL CORPORATION

6 unchanged sentences

( 2,139,124 )

( 7,400,620 )

( 2,553,385 )

Total Deferred Income Tax

1 unchanged sentence

( 2,495,489 )

( 9,954,005 )

reconciliation of income tax expense at the U.S.

2 unchanged sentences

Computed expense at statutory rate

State tax expense (benefit), net of federal tax

State tax expense (benefit), net of federal

Change in valuation allowance

4 unchanged sentences

differ from the U.S.

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

allowance related to Kilpatrick Life Insurance Company.

The decrease in the effective tax rate when compared to the prior year is partially

due to a decrease to the valuation allowance in the current period when compared to the prior period year.

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

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.

of December 31, 2024, the Company had no significant unrecognized tax benefits.

4 unchanged sentences

Summary of Operating Loss Carryforwards

Net Operating Losses and Tax Credit Carryforwards:

Operating Losses and Tax Credit Carryforwards:

Year of Expiration

16 unchanged sentences

insurance in force as of December 31, 2024 and 2023, respectively.

See Financial Statement Schedule IV for information regarding life

insurance in force and premiums for reinsurance.

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

7 unchanged sentences

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

50 unchanged sentences

The Company did not make any contributions for 2024 and 2023.

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

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

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

10 unchanged sentences

benefits are to be paid to his heirs.

The Company expensed nil and nil during 2023 and 2022, respectively, to cover the present value

of anticipated retirement benefits under the employment agreement.

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, 2023 and 2022, respectively.

Company, through its wholly owned subsidiary, SecurityNational Mortgage, 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,

Such retirement payments are paid monthly during the ten-year period.

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 paid $ 133,843 and $ 133,843 in

retirement compensation to this individual during 2023 and 2022, respectively.

The liability accrued was $ 267,686 and $ 401,529 as of

December 31, 2023 and 2022, respectively and is included in other liabilities and accrued expenses on the consolidated balance sheets.

31, 2024 and 2023, respectively and is included in other liabilities and accrued expenses on the consolidated balance sheets.

NATIONAL FINANCIAL CORPORATION

18 unchanged sentences

Exercise of stock options

Vesting of restricted stock units

Stock dividends

Conversion of Class C to Class A

Vesting of restricted stock

Conversion of Class C to

Outstanding shares at December 31, 2023

1 unchanged sentence

Exercise of stock options

Vesting of restricted stock units

Stock dividends

Conversion of Class C to Class A

Vesting of restricted stock

Conversion of Class C to

Outstanding shares at December 31, 2024

Common stock, shares, outstanding, ending

(1) Adjusted retroactively for the effect

of annual stock dividends

NATIONAL FINANCIAL CORPORATION

12 unchanged sentences

restricted stock units

potential common shares

for diluted earnings per share-adjusted weighted-average shares and assumed conversions

Dilutive potential common

Denominator for diluted

share-adjusted weighted-average shares and assumed conversions

Basic earnings per share

Diluted earnings per share

2023 and 2022, there were nil and 339,150 of anti-dilutive employee stock option shares, respectively, that were not included in the

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.

20 unchanged sentences

Schedule of Assumptions Used

Weighted-Average

Fair Value of Each Option

of Each Option

Dividend Yield (1)

Weighted-Average

Risk-Free Interest Rate

Weighted-Average

Expected Life (years)

December 26, 2024

December 6, 2024

January 12, 2024

1 unchanged sentence

December 1, 2023

January 30, 2023

January 18, 2023

(1) Stock dividend

3 unchanged sentences

Stock Compensation Plans (Continued)

of the stock option plans is summarized as follows:

activity of the stock option plans is summarized as follows:

Schedule of Activity of Stock Option Plans

18 unchanged sentences

exercisable at December 31, 2024 (1)

(1) The Company used a stock price of

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

9 unchanged sentences

expense related to the RSUs issued was $ 37,299 , which is expected to be recognized over the remaining vesting period.

of the RSUs is summarized as follows:

activity of the RSUs is summarized as follows:

Schedule of Activity Restricted Stock Units

1 unchanged sentence

Average Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at December 31, 2023

4 unchanged sentences

Ended December 31, 2024 and 2023

Statutory Financial Information and Dividend Limitations

Company’s insurance subsidiaries prepare their statutory-basis financial statements in conformity with accounting practices prescribed

or permitted by the insurance department of the applicable state of domicile.

Prescribed statutory accounting practices include a variety

of publications of the NAIC, as well as state laws, regulations, and general administrative rules.

Permitted statutory accounting practices

encompass all accounting practices not so prescribed.

states in which the Company’s life insurance subsidiaries are domiciled require the preparation of statutory-basis financial statements

in conformity with the NAIC Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the applicable

insurance commissioner and/or director.

Statutory accounting practices differ from GAAP primarily since they require charging policy

acquisition and certain sales inducement costs to expense as incurred, establishing life insurance reserves based on different actuarial

assumptions, and valuing certain investments and establishing deferred taxes on a different basis.

net income and capital and surplus of the Company’s insurance subsidiaries, determined in accordance with statutory accounting

practices prescribed or permitted by insurance regulatory authorities are as follows:

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

1 unchanged sentence

Statutory Capital and Surplus

Ended December 31,

Years Ended December 31,

Amounts by insurance subsidiary:

Security National Life Insurance

Security National Life Insurance Company

Kilpatrick Life Insurance Company

1 unchanged sentence

Southern Security Life Insurance Company, Inc.

Trans-Western Life Insurance

Trans-Western Life Insurance Company

$ 120,216,493

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

were developed by the NAIC on insurance enterprises.

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

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

Regulatory compliance is determined by a ratio

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

defined by the NAIC.

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

specified corrective action.

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

as of December 31, 2023.

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

Company’s agreement to provide additional capital to Security National Life Insurance Company in the event risk-based capital drops

below 350% of the authorized control level.

$ 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

4 unchanged sentences

Ended December 31, 2024 and 2023

14) Statutory

Financial Information and Dividend Limitations (Continued)

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,

36 unchanged sentences

Segment Information

Note 1 regarding the adoption of ASU 2023-07.

of Products and Services by Segment

Company has three reportable business segments:

Company has three

operating and reportable business segments:

life insurance, cemetery and mortuary, and mortgage.

The Company’s life insurance

segment consists of life insurance premiums and operating expenses from the sale of insurance products sold by the Company’s independent

agency force and net investment income derived from investing policyholder and segment surplus funds.

The Company’s cemetery and

mortuary segment consists of revenues and operating expenses from the sale of at-need cemetery and mortuary merchandise and 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 segment surplus funds.

The Company’s mortgage segment consists of fee income and expenses from

the originations of residential mortgage loans and interest earned and interest expenses from warehousing pre-sold loans before the funds

are received from financial institutional investors.

of Segment Profit or Loss and Segment Assets

accounting policies of the reportable segments are the same as those described in the Significant Accounting Principles.

revenues are recorded at cost plus an agreed upon intercompany profit and are eliminated upon consolidation.

Management Used to Identify the Enterprise’s Reportable Segments

Company’s 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.

The Company regularly reviews the quantitative thresholds and other criteria

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

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.

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.

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.

NATIONAL FINANCIAL CORPORATION

5 unchanged sentences

From external sources:

Revenue from customers

Revenue from external customers

$ 119,655,745

$ 107,558,640

$ 256,251,558

Net investment income

2 unchanged sentences

Intersegment revenues

Net investment income

( 9,074,713 )

Total revenues

Total segment revenues

Elimination of intersegment revenues

( 8,186,492 )

Death, surrenders and other policy benefits

Total consolidated revenues

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

3 unchanged sentences

Depreciation on property and equipment

Provision for loan loss reserve

Cost related to funding mortgage loans

( 2,384,711 )

Data processing and IT related (1)

Premium taxes on insurance premiums and other considerations (1)

Other segment items (1)(2)

Intersegment expenses (3)

Interest expense

( 6,690,002 )

Costs of goods and services sold-mortuaries and cemeteries

Total benefits and expenses

( 9,074,713 )

Earnings (loss) before income taxes

$ ( 17,416,285 )

Income tax benefit (expense)

Income tax expense (benefit)

( 1,263,871 )

Segment net earnings (loss)

( 4,949,288 )

Segment assets

$ 1,396,093,195

Net earnings (loss)

$ 101,524,343

Identifiable assets

$ 1,582,792,350

Elimination of intersegment assets

( 92,985,136 )

Total consolidated assets

$ 1,489,807,214

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.

(2) 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.

- 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.

NATIONAL FINANCIAL CORPORATION

4 unchanged sentences

From external sources:

Revenue from customers

$ 105,144,646

Revenue from external customers

$ 114,735,304

4 unchanged sentences

Intersegment revenues

Net investment income

( 7,408,845 )

Total revenues

Total segment revenues

Elimination of intersegment revenues

( 9,074,713 )

Death, surrenders and other policy benefits

Total consolidated revenues

Death benefits

Surrenders and other policy benefits

Increase in future policy benefits

3 unchanged sentences

Depreciation on property and equipment

Provision for loan loss reserve

Cost related to funding mortgage loans

( 2,189,112 )

Data processing and IT related (1)

Premium taxes on insurance premiums and other considerations (1)

Other segment items (1)(2)

Intersegment expenses (3)

Interest expense

( 5,219,733 )

Costs of goods and services sold-mortuaries and cemeteries

Total benefits and expenses

( 7,408,845 )

Earnings before income taxes

Income tax expense

( 4,034,979 )

( 1,523,954 )

Income tax expense (benefit)

( 3,981,083 )

Segment net earnings (loss)

( 13,435,202 )

Identifiable assets

Segment assets

$ 1,329,049,024

$ 1,523,615,715

Elimination of intersegment assets

( 93,063,440 )

Total consolidated assets

$ 1,430,552,275

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.

(2) 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.

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.

NATIONAL FINANCIAL CORPORATION

13 unchanged sentences

value measurements are classified under the following hierarchy:

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

liabilities in an active market that the Company can access.

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

in an active market that the Company can access.

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

a) Quoted prices for similar assets or liabilities in active markets;

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

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities

in non-active markets;

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

16 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

A portion of these assets include equity securities and fixed maturity securities available for sale that have quoted

9 unchanged sentences

their short-term nature

and Put Options :

The Company uses quoted market prices to value its call and put options.

Additionally,

34 unchanged sentences

Real Estate Held for Investment :

The Company believes that in an orderly market, fair value will approximate the replacement

cost of a home and the rental income provides a cash flow stream for investment analysis.

The Company believes the highest and best use

of the properties are as income producing assets since it is the Company’s intent to hold the properties as rental properties,

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

Fair value is generally determined by obtaining an independent appraisal, which typically considers

area comparable properties and property condition.

The Company believes that in an orderly market, fair value approximates the replacement

cost of a home and will list for sale any foreclosed properties.

In a disorderly market, the Company believes the highest and best use

of the properties is as income producing assets and will hold the properties as rental properties, matching the income from the investment

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

1 unchanged sentence

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

38 unchanged sentences

$ ( 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 )

10 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair 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

22 unchanged sentences

recurring basis

Derivatives - call options (4)

Derivatives - put options (4)

Derivatives - loan commitments (4)

5 unchanged sentences

$ ( 3,412,224 )

(1) Fixed maturity securities available for sale

(1) Fixed maturity

securities available for sale

(2) Equity securities

(3) Included in other assets on the consolidated balance sheets

(4) Included in other liabilities and accrued expenses on the consolidated balance sheets

(3) Included in other

assets on the consolidated balance sheets

(4) Included in other

liabilities and accrued expenses on the consolidated balance sheets

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

used in the fair value measurements were as follows:

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

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

Range of Inputs

14 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

24 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

(1) As a component of mortgage fee income on the consolidated statements of earnings

(2) As a component of net investment income on the consolidated statements of earnings

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

24 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

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

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

Schedule of Fair Value Assets Measured on a Nonrecurring Basis

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a

nonrecurring basis

Impaired mortgage loans held for investment

Total assets accounted for at fair value on

a nonrecurring basis

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Value of Financial Instruments (Continued)

2024 and 2023, respectively.

Value of Financial Instruments Carried at Other Than Fair Value

42 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

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

38 unchanged sentences

are evaluated individually for impairment.

— The estimated fair value of mortgage loans is determined through a combination of discounted cash flows (estimating expected

future cash flows of payments and discounting them using current interest rates from single family mortgages) and considering pricing

of similar loans that were sold recently.

— The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current

interest rates for single family mortgages and considering pricing of similar loans that were sold recently.

Construction — These loans are primarily short in maturity.

11 unchanged sentences

Ended December 31, 2024 and 2023

Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued)

and Other Loans Payable :

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

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

The carrying amounts

reported in the accompanying consolidated balance sheet for the bank loans collateralized by real estate approximate their fair values

due to the non-assumable fixed rates.

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

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

The estimated fair value

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

market rates.

Account Balances and Future Policy Benefits-Annuities :

5 unchanged sentences

The fair values for these investment-type insurance

contracts are estimated based on the present value of liability cash flows.

The fair values for the Company’s insurance contracts

other than investment-type contracts are not required to be disclosed.

However, the fair values of liabilities under all insurance contracts

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 contracts.

Accumulated Other Comprehensive Income (loss)

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 (losses) on fixed maturity securities available for sale

$ ( 39,493,861 )

Unrealized gains on fixed maturity securities available for sale

Amounts reclassified into net earnings

Net unrealized gains (losses) before taxes

( 39,331,688 )

Tax benefit (expense)

( 1,640,186 )

( 31,072,032 )

Unrealized gains (losses) on restricted assets (1)

Unrealized gains on restricted assets (1)

Tax benefit (expense)

2 unchanged sentences

Other comprehensive income (loss) changes

$ ( 31,140,725 )

(1) Fixed maturity

securities available for sale

Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2024 and 2023

18) Accumulated

Other Comprehensive Income (loss) (Continued)

Accumulated Other Comprehensive Income (loss) (Continued)

following is the accumulated balances of other comprehensive income (loss) as of December 31, 2024:

2 unchanged sentences

Change for the period

Ending Balance

Unrealized gains (losses) on fixed maturity securities

Ending Balance December 31,

Unrealized gains on fixed maturity securities

available for sale

2 unchanged sentences

Unrealized gains (losses) on restricted assets (1)

Unrealized gains (losses) on cemetery perpetual

Unrealized losses on cemetery perpetual

care trust investments (1)

Other comprehensive income (loss)

Other comprehensive loss

$ ( 6,885,558 )

$ ( 6,951,266 )

(1) Fixed maturity

securities available for sale

Fixed maturity securities available for sale

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

1 unchanged sentence

Change for the period

Ending Balance

Ending Balance December 31,

Unrealized gains (losses) on fixed maturity securities

8 unchanged sentences

$ ( 6,885,558 )

(1) Fixed maturity

securities available for sale

Fixed maturity securities available for sale

NATIONAL FINANCIAL CORPORATION

2 unchanged sentences

19) Derivative Instruments

Company reports derivative instruments pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.

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.

14 unchanged sentences

$ 161,832,250

Other liabilities

$ 210,597,657

2 unchanged sentences

There were no gains or losses reclassified from accumulated other comprehensive

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

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

4 unchanged sentences

$ ( 1,123,615 )

$ ( 4,308,638 )

Call and put options

3 unchanged sentences

Ended December 31, 2024 and 2023

Mortgage Servicing Rights

Company reports MSRs pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.

Servicing Rights

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

following table presents the MSR activity.

4 unchanged sentences

Amortization (1)

( 9,078,706 )

( 51,185,906 )

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

Application of valuation allowance to write down MSRs

with other than temporary impairment

Balance before valuation allowance at year end

1 unchanged sentence

Balance at beginning of year

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

Application of valuation allowance to write down MSRs

with other than temporary impairment

Balance at year end

29 unchanged sentences

December 31, 2023

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

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

unpaid principal amount of approximately $ 7.02 billion.

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

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

Substantially

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

completed the physical transfer of files prior to its deadline.

The holdbacks were received in 2023.

NATIONAL FINANCIAL CORPORATION

1 unchanged sentence

Ended December 31, 2024 and 2023

Future Policy Benefits and Unpaid Claims

Company reports future policy benefits and unpaid claims pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated

Financial Statements.

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.

77 unchanged sentences

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 to

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.

A transfer of goods and

services does not fulfill an obligation and revenue remains deferred.

NATIONAL FINANCIAL CORPORATION

20 unchanged sentences

net on the consolidated balance sheets

NATIONAL FINANCIAL CORPORATION

to Consolidated Financial Statements

Ended December 31, 2023 and 2022

Revenues from Contracts with Customers (Continued)

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

33 unchanged sentences

of Revenues of the Cemetery and Mortuary Contracts

Years Ended December 31

Major goods/service lines

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

of Revenue Recognition

transferred at a point in time

Net mortuary and cemetery

6 unchanged sentences

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 under ASC 606.

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

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 :

18 unchanged sentences

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% the revenue and associated commissions are deferred until such a time when 10% of the contract

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.

2 unchanged sentences

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

Years Ended December 31

Pre-need merchandise and services

40 unchanged sentences

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 nonlease components;

or the determination of the discount rates for the

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

23 unchanged sentences

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

(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

NATIONAL FINANCIAL CORPORATION

37 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data