Loans Held for Sale

3 Months Ended

Mar. 31, 2026

3) Loans Held for Sale

The Company’s loans held for sale portfolio is valued using the fair value option. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on recognition of mortgage loan interest income and is included in mortgage fee income on the condensed consolidated statement of earnings. See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.

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

	As of March 31, 2026		As of December 31, 2025

Aggregate fair value	$	137,607,689	$	155,968,266
Unpaid principal balance		137,122,949		154,484,198
Unrealized gain		484,740		1,484,068

Mortgage Fee Income

Mortgage 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.

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

	2026			2025
	Three Months Ended March 31,
	2026			2025
Loan fees	$	5,734,513		$	5,254,090
Interest income		1,730,664			1,667,434
Secondary gains		16,414,739			16,954,943
Change in fair value of loan commitments		1,384,727			474,540
Change in fair value of loans held for sale		(1,603,988	)		641,268
Provision for loan loss reserve		(170,996	)		(183,034	)
Mortgage fee income	$	23,489,659		$	24,809,241

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2026 (Unaudited)

3) Loans Held for Sale (Continued)

Loan Loss Reserve

Repurchase demands (“demand(s)”) from third party investors for mortgage loans previously held for sale and sold are reviewed, and relevant data is captured so that an estimated future loss can be calculated. The key factors that are used in the estimated future loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a demand. In many instances, the Company can resolve the issues relating to the demand by the third-party investor without having to make any payments to the investor.

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

	As of March 31, 2026			As of December 31, 2025
Balance, beginning of period	$	384,184		$	696,626
Provision on current loan originations (1)		170,996			805,518
Additional provision (2)		-			40,000
Charge-offs, net of recaptured amounts		(170,996	)		(1,157,960	)
Balance, end of period	$	384,184		$	384,184

(1)

Included in mortgage fee income

(2)

Included in other expenses

The Company maintains reserves for estimated losses on current production volumes. For the three-month period ended March 31, 2026, $170,996 in reserves were added at a rate of 3.5 basis points per loan, the equivalent of $350 per $1,000,000 in loans originated. For the three-month period ended March 31, 2025, $183,034 in reserves were added at a rate of 3.5 basis points per loan, the equivalent of $350 per $1,000,000 in loans originated. The Company monitors market data and trends, and economic conditions (including forecasts) and uses its own experience to determine adequate loss reserves on current production.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2026 (Unaudited)