United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM
(Mark One)
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 |
For the quarterly period ended
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period From ___________________ to ___________________ .
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices)
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer: ☐ |
Accelerated filer: ☐ |
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Smaller reporting company: |
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Emerging growth company: |
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If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 10, 2026, the registrant had
Securities registered pursuant to section 12(b) of the Act: None.
FIRST TRINITY FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTERLY PERIOD ENDED JUNE 30, 2026
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
Page Number |
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Item 1. Consolidated Financial Statements |
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Consolidated Statements of Financial Position as of June 30, 2026 (Unaudited) and December 31, 2025 |
3 |
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) |
4 |
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Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) |
5 |
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Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) |
6 |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (Unaudited) |
7 |
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Notes to Consolidated Financial Statements (Unaudited) |
9 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
47 |
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Item 4. Controls and Procedures |
77 |
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Part II. OTHER INFORMATION |
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Item 1. Legal Proceedings |
78 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
78 |
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Item 3. Defaults upon Senior Securities |
78 |
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Item 4. Mine Safety Disclosures |
78 |
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Item 5. Other Information |
78 |
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Item 6. Exhibits |
79 |
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Signatures |
80 |
Exhibit No. 31.1
Exhibit No. 31.2
Exhibit No. 32.1
Exhibit No. 32.2
Exhibit No. 101.INS
Exhibit No. 101.SCH
Exhibit No. 101.CAL
Exhibit No. 101.DEF
Exhibit No. 101.LAB
Exhibit No. 101.PRE
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
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First Trinity Financial Corporation and Subsidiaries |
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Consolidated Statements of Financial Position |
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(Unaudited) |
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June 30, 2026 |
December 31, 2025 |
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Assets |
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Investments |
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Available-for-sale fixed maturity securities at fair value (amortized cost: $ |
$ | $ | ||||||
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Equity securities at fair value (cost: $ |
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Mortgage loans on real estate |
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Investment real estate |
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Policy loans |
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Other long-term investments |
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Total investments |
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Cash and cash equivalents |
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Accrued investment income |
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Recoverable from reinsurers |
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Assets held in trust under coinsurance agreement |
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Available-for-sale fixed maturity securities at fair value (amortized cost: $ |
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Mortgage loans on real estate |
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Investment real estate |
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Cash and cash equivalents |
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Total assets held in trust under coinsurance agreement |
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Agents' balances and due premiums |
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Deferred policy acquisition costs |
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Value of insurance business acquired |
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Other assets |
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Total assets |
$ | $ | ||||||
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Liabilities and Shareholders' Equity |
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Policy liabilities |
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Policyholders' account balances |
$ | $ | ||||||
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Future policy benefits |
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Policy claims |
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Other policy liabilities |
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Total policy liabilities |
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Funds withheld under coinsurance agreement |
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Deferred federal income taxes |
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Other liabilities |
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Total liabilities |
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Shareholders' equity |
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Class A common stock, par value $ per share ( |
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Class B common stock, par value $ per share ( |
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Additional paid-in capital |
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Treasury stock, at cost ( |
( |
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Accumulated other comprehensive income |
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Accumulated earnings |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
$ | $ | ||||||
See notes to consolidated financial statements (unaudited).
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First Trinity Financial Corporation and Subsidiaries |
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Consolidated Statements of Operations |
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(Unaudited) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2026 |
2025 |
2026 |
2025 |
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Restated |
Restated |
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Premiums |
$ | $ | $ | $ | ||||||||||||
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Net investment income |
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Net realized investment gains (losses) |
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Service fees |
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Other income |
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Total revenues |
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Benefits, Claims and Expenses |
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Benefits and claims |
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Increase in future policy benefits |
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Death benefits |
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Surrenders |
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Interest credited to policyholders |
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Dividend, endowment and supplementary life contract benefits |
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Total benefits and claims |
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Policy acquisition costs deferred |
( |
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Amortization of deferred policy acquisition costs |
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Amortization of value of insurance business acquired |
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Commissions |
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Other underwriting, insurance and acquisition expenses |
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Total expenses |
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Total benefits, claims and expenses |
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Income before total federal income tax expense (benefit) |
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Current federal income tax expense |
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Deferred federal income tax expense (benefit) |
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Total federal income tax expense |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Net income per common share |
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Class A common stock |
$ | $ | $ | $ | ||||||||||||
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Class B common stock |
$ | $ | $ | $ | ||||||||||||
See notes to consolidated financial statements (unaudited).
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First Trinity Financial Corporation and Subsidiaries |
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Consolidated Statements of Comprehensive Income |
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(Unaudited) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2026 |
2025 |
2026 |
2025 |
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Restated |
Restated |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Other comprehensive income (loss) |
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Total net unrealized investment gains (losses) arising during the period |
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Less net realized investment gains (losses) having no credit losses |
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Net unrealized investment gains (losses) |
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Remeasurement gains (losses) on future policy benefits related to discount rate |
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Other comprehensive income (loss) before federal income tax expense (benefit) |
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Federal income tax expense (benefit) |
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Total other comprehensive income (loss) |
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Total comprehensive income |
$ | $ | $ | $ | ||||||||||||
See notes to consolidated financial statements (unaudited).
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First Trinity Financial Corporation and Subsidiaries |
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Consolidated Statements of Changes in Shareholders' Equity |
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Three and Six Months Ended June 30, 2026 and 2025 |
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(Unaudited) |
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Class A |
Class B |
Accumulated |
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Common |
Common |
Additional |
Other |
Total |
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Stock |
Stock |
Paid-in |
Treasury |
Comprehensive |
Accumulated |
Shareholders' |
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$.01 Par Value |
$.01 Par Value |
Capital |
Stock |
Income |
Earnings |
Equity |
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Three months ended June 30, 2025 |
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Balance as of April 1, 2025 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Comprehensive income: |
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Net income |
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Other comprehensive income |
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Balance as of June 30, 2025 (Restated) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Six months ended June 30, 2025 |
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Balance as of January 1, 2025 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Comprehensive income: |
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Net income |
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Other comprehensive income |
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Balance as of June 30, 2025 (Restated) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Three months ended June 30, 2026 |
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Balance as of April 1, 2026 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Comprehensive income: |
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Net income |
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Other comprehensive loss |
( |
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Balance as of June 30, 2026 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Six months ended June 30, 2026 |
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Balance as of January 1, 2026 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
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Comprehensive income: |
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Net income |
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Other comprehensive loss |
( |
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Balance as of June 30, 2026 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||
See notes to consolidated financial statements (unaudited).
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First Trinity Financial Corporation and Subsidiaries |
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Consolidated Statements of Cash Flows |
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(Unaudited) |
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Six Months Ended June 30, |
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2026 |
2025 |
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Restated |
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Net income |
$ | $ | ||||||
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Accretion of discount on investments |
( |
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Net realized investment gains |
( |
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Amortization of policy acquisition cost |
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Policy acquisition cost deferred |
( |
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Amortization of value of insurance business acquired |
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Allowance for mortgage loan losses |
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Provision for deferred federal income tax expense |
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Interest credited to policyholders |
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Change in assets and liabilities: |
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Accrued investment income |
( |
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Recoverable from reinsurers |
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Assets held in trust under coinsurance agreement |
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Agents' balances and due premiums |
( |
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Other assets (excludes change in receivable for securities sold of $ |
( |
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Future policy benefits |
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Policy claims |
( |
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Other policy liabilities |
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Other liabilities (excludes change in payable for securities purchased of $ |
( |
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Net cash provided by operating activities |
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Investing activities |
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Purchases of fixed maturity securities |
( |
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Maturities of fixed maturity securities |
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Sales of fixed maturity securities |
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Purchases of equity securities |
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Proceeds from realized capital gains, equity securities |
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Joint venture distributions |
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Purchases of mortgage loans |
( |
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Payments on mortgage loans |
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Purchases of other long-term investments |
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Payments on other long-term investments |
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Sale of real estate |
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Net change in policy loans |
( |
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Net change in receivable and payable for securities sold and purchased |
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Net cash used in investing activities |
( |
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Financing activities |
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Policyholders' account deposits |
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Policyholders' account withdrawals |
( |
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Net cash provided by (used in) financing activities |
( |
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Increase (decrease) in cash and cash equivalents |
( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ | $ | ||||||
See notes to consolidated financial statements (unaudited).
First Trinity Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure – Cash and Non-Cash Impact on Investing Activities
(Unaudited)
During the six months ended June 30, 2026 and 2025, the Company foreclosed on residential mortgage loans of real estate totaling $
In conjunction with this foreclosure, the non-cash impact on investing activities is summarized as follows:
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Six Months Ended |
Six Months Ended |
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June 30, 2026 |
June 30, 2025 |
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Reductions in mortgage loans due to foreclosure |
$ | $ | ||||||
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Investment real estate held-for-sale acquired through foreclosure |
( |
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Net cash used in investing activities |
$ | $ | ||||||
See notes to consolidated financial statements (unaudited).
First Trinity Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2026
(Unaudited)
1. Organization and Significant Accounting Policies
Nature of Operations
First Trinity Financial Corporation (the “Company” or “FTFC”) is the parent holding company of Trinity Life Insurance Company (“TLIC”), Family Benefit Life Insurance Company (“FBLIC”), Trinity Mortgage Corporation (“TMC”) and Trinity American, Inc. (“TAI”). The Company was incorporated in Oklahoma on April 19, 2004, for the primary purpose of organizing a life insurance subsidiary.
The Company owns
The Company owns
The Company owns
Company Capitalization
The Company raised $
The Company also issued
The Company has also purchased
In settlement of a lawsuit in 2025, the Company was awarded
1. Organization and Significant Accounting Policies (continued)
Acquisition of Other Companies
On December 23, 2008, FTFC acquired
On December 31, 2008, FTFC made FLAC a
On August 31, 2009, of the Company’s subsidiaries, Trinity Life Insurance Company (“Old TLIC”) and FLAC, were merged, with FLAC being the surviving company. Immediately following the merger, FLAC changed its name to TLIC.
On December 28, 2011, TLIC acquired
On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $
On April 3, 2018, FTFC acquired
Effective January 1, 2020, the Company acquired
On January 4, 2022, FTFC acquired Royalty Capital Life Insurance Company (“RCLIC”) from Royalty Capital Corporation (“Royalty”) in exchange for
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.
The results of operations for the six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the year ended December 31, 2026 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's report on Form 10-K for the year ended December 31, 2025.
1. Organization and Significant Accounting Policies (continued)
Investments
Fixed maturity securities comprised of bonds and redeemable preferred securities are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity.
Interest income on fixed maturity securities, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. Dividend income on redeemable preferred securities are recognized in net investment income when declared. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline in value is considered to be other-than-temporary.
The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings.
The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency ratings, the financial condition of the issuer or underlying obligors, payment history, payment structure of the security, industry and market conditions, underlying collateral, and other factors that may be relevant based on the facts and circumstances pertaining to individual securities.
If the Company intends to sell the fixed maturity security or will be more likely than not be required to sell the fixed maturity security before recovery of its amortized cost basis, then any allowance for credit losses, if previously recorded is written off and the fixed maturity security’s amortized cost is written down to the security’s fair value as of the reporting date with any incremental impairment recorded as a charge to noninterest income.
Equity securities are comprised of mutual funds and common stocks and are carried at fair value. The associated unrealized gains and losses are included in net realized investment gains (losses). Dividends from these investments are recognized in net investment income when declared.
Mortgage loans are carried at unpaid balances, net of unamortized premium or discounts. This measurement of mortgage loans on an amortized cost basis is reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized costs basis of mortgage loans to present the net carrying value at the amount expected to be collected on the mortgage loans.
Interest income and the amortization of premiums or discounts are included in net investment income. Mortgage loan fees, certain direct loan origination costs, and purchase premiums and discounts on loans are recognized as an adjustment of yield by the interest method based on the contractual terms of the loan. In certain circumstances, prepayments may be anticipated.
The statement of operations reflects the measurement of credit losses for newly recognized mortgage loans as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported mortgage loan balances. The Company uses judgment in determining the relevant information and estimation methods that are appropriate in establishing the valuation allowance for credit losses. The allowance for credit losses for mortgage loans with a more-than-insignificant amount of credit determination since origination is determined and the initial allowance for credit losses should be added to the purchase price of mortgage loans rather than being reported as a credit loss expenses.
1. Organization and Significant Accounting Policies (continued)
The Company, however, has established and will continue to establish a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow based on historical patterns. The Company’s foreclosed properties have not resulted in accumulated losses and due to the low loan-to-value the Company holds with respect to its mortgage loans, the Company has not recorded and does not expect to record the addition to the purchase price of mortgage loans an initial allowance for credit losses to be amortized over the life of the mortgage loans. The Company records credit losses for mortgage loans not supported by funds held in escrow in a valuation account against mortgage loans on real estate.
While the Company utilizes its best judgment and information available, the ultimate adequacy of this allowance is dependent upon a variety of factors beyond our control, including the performance of the residential and commercial mortgage loan portfolio, the economy and changes in interest rates. The allowance for possible mortgage loan losses consists of specific valuation allowances established for probable losses on specific loans and a portfolio reserve for probable incurred but not specifically identified loans.
The Company considers mortgage loans on real estate impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the mortgage loan agreement. Impairment is measured on a loan-by-loan basis. Factors that the Company considers in determining impairment include payment status, collateral value of the real estate subject to the mortgage loan and the probability of collecting scheduled principal and interest payments when due. Mortgage loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the mortgage loan on real estate and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.
Investment real estate in land held for both the production of income and for sale is carried at cost. Investment real estate obtained through foreclosure on mortgage loans on real estate is carried at the lower of acquisition cost or net realizable value.
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.
Other long-term investments are comprised of lottery prize receivables and are carried at amortized cost. Interest income and the accretion of discount are included in net investment income. These investments are backed by the lottery departments at the various states by U.S. Treasury Bonds and Notes or in the case of Pennsylvania, by annuities purchased from a highly rated life insurance company. Given this support to lottery prize receivables, the Company has not recorded and does not expect to incur any current estimated credit losses on its investments in lottery prize receivables.
Principles of Consolidation
The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Reclassifications
Certain reclassifications have been made in the prior year and prior quarter financial statements to conform to current year and current quarter classifications. These reclassifications had no effect on previously reported net income or shareholders' equity.
1. Organization and Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.
Common Stock and Treasury Stock
Class A and Class B common stock are both fully paid, non-assessable and has a par value of $ per share. Class B shareholders are entitled to elect a majority of FTFC’s Board of Directors (one-half plus one) but will only receive, compared to FTFC’s Class A shareholders,
Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, is recorded at the reacquisition cost and the shares are no longer outstanding.
Funds Withheld Coinsurance
In accordance with an annuity coinsurance agreement with an offshore annuity and life insurance company, TLIC holds assets and recognizes a funds withheld liability for the benefit of the assuming company in an amount at least equal to the annuity reserves in accordance with U.S. statutory accounting principles generated by this ceded business. In addition, the assuming company maintains a trust related to this ceded business amounting to at least an additional 4% of assets above the annuity reserve required under U.S. statutory accounting principles. This coinsurance agreement may be terminated for new business by either party at any time upon 30 days prior written notice to the other party.
In addition, in accordance with this annuity coinsurance agreement, investment income, investment expenses, other income and other expenses earned or incurred in relation to the operations of this annuity coinsurance agreement are not reported on the Company’s Consolidated Statements of Operations. The unrealized appreciation (depreciation) of fixed available-for-sale fixed maturity securities and the related income tax expense (benefit) is not reported as accumulated other comprehensive income in the shareholders’ equity section of the Company’s Consolidated Statements of Financial Position. Correspondingly, the net unrealized gains (losses) arising during the period, the net realized gains (losses) having no credit gains (losses) and the related income tax expense (benefit) associated with the available-for-sale fixed maturities held under this coinsurance agreement are not included in the computation of total other comprehensive income (loss) in the Company’s Consolidated Statement of Comprehensive Income.
The Company’s Consolidated Statement of Cash Flows only includes the cash flow activities related to the assets and funds withheld under the coinsurance agreement in a one-line presentation and does not include those cash flow activities in the other financial captions and categories presented in that financial statement.
Cybersecurity
The Company has established and continues to enhance its cybersecurity enterprise risk management program. The Company’s executive team meets formally at least monthly, and informally as needed, to set and maintain a strategy focused on achieving a high level of cybersecurity protection. The Company’s executive management team makes quarterly reports to the Company’s Board of Directors and Audit Committee.
1. Organization and Significant Accounting Policies (continued)
The Company’s executive management team is enhanced by the inclusion of an information technology external consultant to advise the Company’s executive management team and to focus on developing and maintaining external and internal cybersecurity. Working with Company executives and staff, the information technology consultant advises and helps the Company implement its strategy with respect to:
|
● |
Computer hardware and software, |
|
● |
Security access, logging and user termination, |
|
● |
In house and remote user access – user accounts, password protection, authentication, monitoring usage, intrusion detection, incident identification and related controls, |
|
● |
Encryption, |
|
● |
System change control, |
|
● |
Data back up and remote sites, |
|
● |
Data recovery, |
|
● |
And Disaster recovery |
The Company also utilizes training to foster an environment of information security awareness, training and education. Beyond making employees aware of its cybersecurity risk management program, strategy and governance, this training also introduces all employees to many types of cybersecurity risks to introduce skepticism and enhance skills to identify and report potential situations encountered to the executive management team for further assessment.
Subsequent Events
Management has evaluated all events subsequent to June 30, 2026 through the date that these financial statements have been issued.
Adopted Accounting Standards
Improvements to Income Tax Disclosures
In December 2023, the FASB issued amendments (Accounting Standards Update 2023-09) to enhance the transparency and decision usefulness of income tax disclosures. The amendments required that public business entities on an annual basis disclose information about taxes paid and a tabular reconciliation using both percentages and amounts of specific categories in the rate reconciliation. In addition, separate disclosure was required for any reconciling item equal to or greater than five (5) percent of the amount computed by multiplying the income or loss from continuing operations before income taxes by the statutory income tax rate. If not otherwise evident, a public business entity was required to provide an explanation of the individual reconciling items such as the nature, effect and causes of the reconciling items.
The Company adopted this Update and prescribed disclosures for year-end 2025 in accordance with the required effective date. The Company also disclosed the information required by this Update for 2024 year-end reporting. The Company disclosed and will continue to disclose annually the supplementary information for taxes paid (recovered). Interim and annual periods will not disclose income (loss) from continuing operations before tax for domestic and foreign operations but will show the impact of foreign operating losses in the rate reconciliation. In addition, the total amounts of interest and penalties, if any, included in operating results and accrued in the statement of financial position will be disclosed. The Company will not disclose rate reconciliations on an interim basis unless there is a significant change in the Company’s estimated annual effective tax rate compared to the effective tax rate from the prior annual reporting period. If there is a significant change, the Company will disclose the reason for the significant change to the estimated annual effective tax rate.
1. Organization and Significant Accounting Policies (continued)
Since FTFC is a holding company for life insurance and mortgage loan operations, FTFC pays premium taxes and very limited amounts of franchise taxes to states that are not based on allocated amounts of net income (loss). The Company only pays state income taxes on the stand-alone taxable income of FTFC and TMC operations domiciled and operating in the state of Oklahoma. In addition, FTFC pays no foreign taxes or recovers any foreign losses on its operations outside the United States. Based upon these facts, FTFC will not present disaggregated information for state taxes and foreign operations in its disclosures of federal income and other taxes but will have a rate reconciling item for non-taxable foreign tax income or losses. The adoption of this guidance in 2025 did not have a material effect on the Company’s results of operations, financial position or liquidity.
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued updated guidance, Accounting Standards Update 2018-12 (ASU 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The objective of this Update was to improve the timeliness of recognizing changes in the liability for future policy benefits, modified the rate used to discount future cash flows, simplified and improved accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplified the amortization of deferred acquisitions costs and expanded required disclosures.
The expanded disclosure required an insurance entity to provide disaggregated roll forwards of beginning to ending balances of the following: liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs including disclosure about, changes to and effect of changes for significant inputs, judgments, assumptions and methods used in measurements.
The Company adopted ASU 2018-12 on January 1, 2025 for the liability for its non-participating future policy benefits and deferred policy acquisition costs but initially reported and disclosed this adoption with the Company’s December 31, 2025 financial statements in accordance with the guidelines of the pronouncement. The Company’s 2025 quarterly financial statements were not required to adopt this guidance, but those 2025 quarterly financial statements will be restated in 2026 in accordance with the provisions of the Update.
ASU 2018-12 was adopted on a modified retrospective basis such that those balances for the liability for future policy benefits, deferred policy acquisition costs were adjusted to conform to ASU 2018-12 effective January 1, 2024 (i.e., the earliest period presented at adoption). With respect to an analysis for market risk benefits, the Company concluded that it had no market-based options or guarantees associated with its liability for policyholders’ account balances. The financial impact of this guidance on the Company’s 2023, 2024 and 2025 results of operations, financial position and liquidity were reported and disclosed in the Company’s December 31, 2025 financial statements.
1. Organization and Significant Accounting Policies (continued)
The increase (decrease) on the impacted caption in the consolidated statement of operations and consolidated statement of comprehensive income related to the restatement adjustments of ASU 2018-12 for the six months ended June 30, 2025 is summarized as follows:
|
As Previously |
ASU 2018-12 |
Post ASU 2018-12 |
||||||||||
|
Financial Statement Caption |
Reported |
Adoption Impact |
Adoption |
|||||||||
|
Consolidated Statements of Operations |
Six Months Ended June 30, 2025 |
|||||||||||
|
Increase in future policy benefits |
$ | $ | ( |
) | $ | |||||||
|
Amortization of deferred policy acquisition costs |
( |
) | ||||||||||
|
Amortization of value of insurance business acquired |
||||||||||||
|
Deferred federal income tax expense (benefits) |
( |
) | ||||||||||
|
Net income |
||||||||||||
|
Net income per common share: |
||||||||||||
|
Class A |
$ | $ | $ | |||||||||
|
Class B |
||||||||||||
|
Consolidated Statements of Comprehensive Income |
Six Months Ended June 30, 2025 |
|||||||||||
|
Net income |
$ | $ | $ | |||||||||
|
Adjustment to deferred acquisition costs |
( |
) | ||||||||||
|
Remeasurement gains (losses) on future policy benefit related to discount rate |
( |
) | ( |
) | ||||||||
|
Federal income tax expense (benefit) |
( |
) | ||||||||||
|
Total other comprehensive income |
( |
) | ||||||||||
|
Total comprehensive income |
||||||||||||
Recent Accounting Pronouncements
Expense Disaggregation Disclosures
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-03) to disclose more granular information about costs of sales and general and administrative expenses including employee compensation to improve the disclosure about a public enterprise’s expenses by providing more detailed information about the types of expenses commonly presented in expense captions such as costs of sales and general and administrative expenses.
The amendments in this Update require disclosing, in the notes to the financial statements, the following specified information about costs and expenses included in general captions on the face of the financial statements at each interim and annual reporting period of the entity: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil and gas producing activities or other amounts of depletion expenses.
An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In addition, the amendments in this Update do not change or remove current expense disclosure requirements including those of specialized industries.
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2027 and interim reporting beginning in first quarter 2028.
1. Organization and Significant Accounting Policies (continued)
In January 2025, the FASB issued Accounting Standards Update 2025-01 that amended Accounting Standards Update 2024-03 to clarify the effective date of the original pronouncement regarding Expense Disaggregation Disclosures. The FASB’s intent in Accounting Standards Update 2024-03 was that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The FASB acknowledges, however, that there was ambiguity that only potentially affected non-calendar year-end entities when Accounting Standards Update 2024-03 was issued.
The amendment in this pronouncement amends the effective date of Accounting Standards Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Accounting Standards Update 2024-03 is permitted. This amendment does not impact the Company.
Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity
In May 2025, the FASB issued amendments (Accounting Standards Update 2025-03) to revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a Variable Interest Entity (“VIE” defined as a legal structure in which controlling interest is determined by something other than majority voting rights and controlling interest is arranged via a contractual relationship rather than through direct ownership) that meets the definition of a business. This amendment requires that the following factors be considered when a VIE is involved to determine which entity is the accounting acquirer:
a. If the business combination is effected primarily by transferring cash or other assets or incurring liabilities, the acquirer is usually the entity that transfers the cash or other assets or incurs the liabilities.
b. Other than a reverse acquisition, if the business combination is effected primarily by exchanging equity interests, the acquirer is usually the entity that issues its equity interests.
c. The acquirer is usually the entity that receives the largest portion of the voting rights of the combined entity.
d. If no owner has a majority voting interest, the acquirer is usually the individual or group that owns the largest minority interest of the combined entity.
e. The acquirer is usually the individual or group that has the ability to elect, appoint or remove members of the combined entity.
f. The acquirer is usually the individual or group that dominates management of the combined entity.
g. The acquirer is usually the individual or group that pays a premium over the pre-combination fair value of the
other combined entity or entities.
h. The acquirer is usually the individual or group whose relative size in terms of assets, revenues, earnings or some other measure is significantly larger than the other combining entity or entities.
i. In a business combination involving more than two entities, the acquirer is usually the entity that initiated the combination and is significantly larger than the other combining entity or entities.
The amendments in this guidance are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued (or made available for issuance). If an entity adopts these amendments in an interim reporting period, it shall adopt as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period.
1. Organization and Significant Accounting Policies (continued)
An entity shall apply this guidance on a prospective basis to all business combinations that have an acquisition date that occurs on or after the date of initial application. An entity shall disclose in both the interim reporting period (if applicable) and the annual reporting period of the change the nature of and reason for the change in accounting principle.
This guidance does not currently impact the Company’s consolidation of its subsidiaries but Update 2025-03 will be followed in any future business combination situations.
2. Investments
Investments in fixed maturity available-for-sale securities as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
Gross |
Gross |
|||||||||||||||
|
Amortized Cost |
Unrealized |
Unrealized |
Fair |
|||||||||||||
|
or Cost |
Gains |
Losses |
Value |
|||||||||||||
|
June 30, 2026 (Unaudited) |
||||||||||||||||
|
Fixed maturity securities |
||||||||||||||||
|
U.S. government and U.S. government agencies |
$ | $ | $ | $ | ||||||||||||
|
States and political subdivisions |
||||||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||||||
|
Residential mortgage-backed securities |
||||||||||||||||
|
Corporate bonds |
||||||||||||||||
|
Asset-backed securities |
||||||||||||||||
|
Foreign bonds |
||||||||||||||||
|
Redeemable preferred securities |
||||||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Fixed maturity securities held in trust under coinsurance agreement |
$ | $ | $ | $ | ||||||||||||
|
December 31, 2025 |
||||||||||||||||
|
Fixed maturity securities |
||||||||||||||||
|
U.S. government and U.S. government agencies |
$ | $ | $ | $ | ||||||||||||
|
States and political subdivisions |
||||||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||||||
|
Residential mortgage-backed securities |
||||||||||||||||
|
Corporate bonds |
||||||||||||||||
|
Asset-backed securities |
||||||||||||||||
|
Exchange traded securities |
||||||||||||||||
|
Foreign bonds |
||||||||||||||||
|
Redeemable preferred securities |
||||||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Fixed maturity securities held in trust under coinsurance agreement |
$ | $ | $ | $ | ||||||||||||
2. Investments (continued)
All securities in an unrealized loss position as of the financial statement dates, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
Unrealized |
Number of |
|||||||||||
|
Fair Value |
Loss |
Securities |
||||||||||
|
June 30, 2026 (Unaudited) |
||||||||||||
|
Fixed maturity securities |
||||||||||||
|
Less than 12 months in an unrealized loss position |
||||||||||||
|
U.S. government and U.S. government agencies |
$ | $ | ||||||||||
|
States and political subdivisions |
||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||
|
Residential mortgage-backed securities |
||||||||||||
|
Corporate bonds |
||||||||||||
|
Asset-backed securities |
||||||||||||
|
Foreign bonds |
||||||||||||
|
Total less than 12 months in an unrealized loss position |
||||||||||||
|
More than 12 months in an unrealized loss position |
||||||||||||
|
States and political subdivisions |
||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||
|
Corporate bonds |
||||||||||||
|
Asset-backed securities |
||||||||||||
|
Foreign bonds |
||||||||||||
|
Redeemable preferred securities |
||||||||||||
|
Total more than 12 months in an unrealized loss position |
||||||||||||
|
Total fixed maturity securities in an unrealized loss position |
$ | $ | ||||||||||
|
Fixed maturity securities held in trust under coinsurance agreement |
||||||||||||
|
Total more than 12 months in an unrealized loss position |
$ | $ | ||||||||||
|
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position |
$ | $ | ||||||||||
|
December 31, 2025 |
||||||||||||
|
Fixed maturity securities |
||||||||||||
|
Less than 12 months in an unrealized loss position |
||||||||||||
|
States and political subdivisions |
$ | $ | ||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||
|
Residential mortgage-backed securities |
||||||||||||
|
Corporate bonds |
||||||||||||
|
Asset-backed securities |
||||||||||||
|
Total less than 12 months in an unrealized loss position |
||||||||||||
|
More than 12 months in an unrealized loss position |
||||||||||||
|
States and political subdivisions |
||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||
|
Corporate bonds |
||||||||||||
|
Asset-backed securities |
||||||||||||
|
Exchange traded securities |
||||||||||||
|
Foreign bonds |
||||||||||||
|
Redeemable preferred securities |
||||||||||||
|
Total more than 12 months in an unrealized loss position |
||||||||||||
|
Total fixed maturity securities in an unrealized loss position |
$ | $ | ||||||||||
|
Fixed maturity securities held in trust under coinsurance agreement |
||||||||||||
|
Total less than 12 months in an unrealized loss position |
$ | $ | ||||||||||
|
Total more than 12 months in an unrealized loss position |
||||||||||||
|
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position |
$ | $ | ||||||||||
2. Investments (continued)
As of June 30, 2026, the Company held
As of December 31, 2025, the Company held
The change in the current estimate of credit losses on fixed maturity available-for-sale securities for the six months ended June 30, 2026 and December 31, 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Beginning balance |
$ | ( |
) | $ | ( |
) | ||
|
Current estimate of credit losses |
( |
) | ||||||
|
Ending balance |
$ | ( |
) | $ | ( |
) | ||
Net unrealized losses included in other comprehensive income (loss) for investments classified as available-for-sale, net of the effect of deferred income taxes and future policy benefits related to discount rates as of June 30, 2026 and December 31, 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Unrealized depreciation |
||||||||
|
Available-for-sale fixed maturity securities |
$ | ( |
) | $ | ( |
) | ||
|
Other long-term investments |
( |
) | ( |
) | ||||
|
Future policy benefits related to discount rate |
||||||||
|
Deferred income taxes |
( |
) | ( |
) | ||||
|
Accumulated other comprehensive income |
$ | $ | ||||||
|
Assets held in trust under coinsurance agreement |
||||||||
|
Unrealized depreciation on fixed maturity securities available-for-sale |
$ | ( |
) | $ | ( |
) | ||
The information on future policy benefits related to discount rate is discussed in Note 10.
2. Investments (continued)
The Company’s other long-term investments as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Lotteries |
$ | $ | ||||||
|
Co-op loans |
||||||||
|
Commercial mortgage-backed securities |
||||||||
|
Total long-term investments |
$ | $ | ||||||
The Company’s other long-term investments in lottery prize cash flows were $
The Company’s other long-term investments in co-op loans were $
The Company’s amortized cost of other long-term investments in investments in specified properties were $
The amortized cost and fair value of fixed maturity available-for-sale securities and other long-term investments as of June 30, 2026, by contractual maturity, are summarized as follows:
|
June 30, 2026 (Unaudited) |
||||||||||||||||
|
Fixed Maturity Available-For-Sale Securities |
Lottery Prize Cash Flows |
|||||||||||||||
|
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
|
Due in one year or less |
$ | $ | $ | $ | ||||||||||||
|
Due after one year through five years |
||||||||||||||||
|
Due after five years through ten years |
||||||||||||||||
|
Due after ten years |
||||||||||||||||
|
Due at multiple maturity dates |
||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
2. Investments (continued)
The amortized cost and fair value of fixed maturity available-for-sale securities held in trust under coinsurance agreement as of June 30, 2026, by contractual maturity, are summarized as follows:
|
June 30, 2026 (Unaudited) |
||||||||
|
Fixed Maturity Available-For-Sale Securities |
||||||||
|
Amortized Cost |
Fair Value |
|||||||
|
Due in one year or less |
$ | $ | ||||||
|
Due after one year through five years |
||||||||
|
Due after five years through ten years |
||||||||
|
Due after ten years |
||||||||
|
Due at multiple maturity dates |
||||||||
| $ | $ | |||||||
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, mortgage loans on real estate, investment real estate and equity securities for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, (Unaudited) |
||||||||||||||||||||||||||||||||
|
Fixed Maturity Securities |
Mortgage Loans on Real Estate |
Investment Real Estate |
Equity Securities |
|||||||||||||||||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
|||||||||||||||||||||||||
|
Proceeds |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
|
Gross realized gains |
||||||||||||||||||||||||||||||||
|
Gross realized losses |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
|
Loss on impairments |
||||||||||||||||||||||||||||||||
|
Six Months Ended June 30, (Unaudited) |
||||||||||||||||||||||||||||||||
|
Fixed Maturity Securities |
Mortgage Loans on Real Estate |
Investment Real Estate |
Equity Securities |
|||||||||||||||||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
|||||||||||||||||||||||||
|
Proceeds |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
|
Gross realized gains |
||||||||||||||||||||||||||||||||
|
Gross realized losses |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
|
Loss on impairments |
||||||||||||||||||||||||||||||||
2. Investments (continued)
The accumulated change in unrealized investment gains (losses) for fixed maturity available-for-sale securities and other long-term investments for the three and six months ended June 30, 2026 and 2025 and the amount of net realized investment gains (losses) on fixed maturity securities available-for-sale, mortgage loans on real estate, investment real estate and equity securities for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Change in unrealized investment gains (losses): |
||||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||
|
Fixed maturity securities |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Fixed maturity securities held in trust under coinsurance agreement |
||||||||||||||||
|
Other long-term investments |
( |
) | ( |
) | ||||||||||||
|
Net realized investment gains (losses): |
||||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||
|
Fixed maturity securities |
( |
) | ||||||||||||||
|
Fixed maturity securities credit losses |
( |
) | ( |
) | ( |
) | ||||||||||
|
Mortgage loans on real estate |
( |
) | ( |
) | ||||||||||||
|
Investment real estate |
||||||||||||||||
|
Equity securities |
||||||||||||||||
|
Equity securities, changes in fair value |
( |
) | ||||||||||||||
Major categories of net investment income for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Equity securities |
||||||||||||||||
|
Other long-term investments |
||||||||||||||||
|
Mortgage loans |
||||||||||||||||
|
Policy loans |
||||||||||||||||
|
Short-term and other investments |
||||||||||||||||
|
Gross investment income |
||||||||||||||||
|
Investment expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Net investment income |
$ | $ | $ | $ | ||||||||||||
TLIC and FBLIC are required to hold assets on deposit with various state insurance departments for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of June 30, 2026 and December 31, 2025, these required deposits, included in investment assets, had amortized costs that totaled $
2. Investments (continued)
The Company’s mortgage loans by property type as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Residential mortgage loans |
$ | $ | ||||||
|
Commercial mortgage loans by property type |
||||||||
|
Agricultural |
||||||||
|
Apartment |
||||||||
|
Industrial |
||||||||
|
Lodging |
||||||||
|
Office building |
||||||||
|
Retail |
||||||||
|
Total commercial mortgage loans by property type |
||||||||
|
Total mortgage loans |
$ | $ | ||||||
|
Mortgage loans held in trust under coinsurance agreement |
||||||||
|
Commercial mortgage loans |
$ | $ | ||||||
|
Total mortgage loans held in trust under coinsurance agreement |
$ | $ | ||||||
There were
There were
The Company’s investment real estate as of June 30, 2026 and December 31, 2025 is summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Land - held for investment |
$ | $ | ||||||
|
Residential real estate - held for sale |
||||||||
|
Total investment in real estate |
$ | $ | ||||||
TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $
FBLIC owns approximately acre of undeveloped land located in Jefferson City, Missouri with a carrying value of $
During 2026, the Company foreclosed on residential mortgage loans of real estate totaling $
During 2025, the Company foreclosed on residential mortgage loans of real estate totaling $
2. Investments (continued)
During 2026, the Company sold investment real estate property with an aggregate carrying value of $
During 2025, the Company sold investment real estate property with an aggregate carrying value of $
3. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) on the measurement date. The Company also considers the impact on fair value of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity.
The Company holds fixed maturity and equity securities that are measured and reported at fair market value on the statement of financial position. The Company determines the fair market values of its financial instruments based on the fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets include equity securities that are traded in an active exchange market.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include fixed maturity securities with quoted prices that are traded less frequently than exchange-traded instruments or assets and liabilities whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments where independent pricing information was not able to be obtained for a significant portion of the underlying assets.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in and out of the Level 3 category as of the beginning of the period in which the reclassifications occur.
3. Fair Value Measurements (continued)
The Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 is summarized as follows:
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
|
June 30, 2026 (Unaudited) |
||||||||||||||||
|
Fixed maturity securities, available-for-sale |
||||||||||||||||
|
U.S. government and U.S. government agencies |
$ | $ | $ | $ | ||||||||||||
|
States and political subdivisions |
||||||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||||||
|
Residential mortgage-backed securities |
||||||||||||||||
|
Corporate bonds |
||||||||||||||||
|
Asset-backed securities |
||||||||||||||||
|
Foreign bonds |
||||||||||||||||
|
Redeemable preferred securities |
||||||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement |
$ | $ | $ | $ | ||||||||||||
|
Equity securities |
||||||||||||||||
|
Mutual funds |
$ | $ | $ | $ | ||||||||||||
|
Corporate common stock |
||||||||||||||||
|
Total equity securities |
$ | $ | $ | $ | ||||||||||||
|
December 31, 2025 |
||||||||||||||||
|
Fixed maturity securities, available-for-sale |
||||||||||||||||
|
U.S. government and U.S. government agencies |
$ | $ | $ | $ | ||||||||||||
|
States and political subdivisions |
||||||||||||||||
|
U.S. government agency mortgage backed securities |
||||||||||||||||
|
Commercial mortgage-backed securities |
||||||||||||||||
|
Residential mortgage-backed securities |
||||||||||||||||
|
Corporate bonds |
||||||||||||||||
|
Asset-backed securities |
||||||||||||||||
|
Exchange traded securities |
||||||||||||||||
|
Foreign bonds |
||||||||||||||||
|
Redeemable preferred securities |
||||||||||||||||
|
Total fixed maturity securities |
$ | $ | $ | $ | ||||||||||||
|
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement |
$ | $ | $ | $ | ||||||||||||
|
Equity securities |
||||||||||||||||
|
Mutual funds |
$ | $ | $ | $ | ||||||||||||
|
Corporate common stock |
||||||||||||||||
|
Total equity securities |
$ | $ | $ | $ | ||||||||||||
3. Fair Value Measurements (continued)
As of June 30, 2026 and December 31, 2025, Level 3 financial instruments consisted of a private placement common stock that has no active trading and two joint venture investment with a mortgage loan originator.
This private placement common stock represents an investment in a small insurance holding company. The fair value for this security was determined through the use of unobservable assumptions about market participants. The Company has assumed a willing market participant would purchase the security for the same price as the Company paid until such time as this small insurance holding company commences significant operations. The joint venture investments with a mortgage loan originator are accounted for under the equity method of accounting.
Fair values for Level 1 and Level 2 assets for the Company’s fixed maturity available-for-sale and equity securities are primarily based on prices supplied by a third party investment service. The third party investment service provides quoted prices in the market which use observable inputs in developing such rates.
The Company analyzes market valuations received to verify reasonableness and to understand the key assumptions used and the sources. Since the fixed maturity securities owned by the Company do not trade on a daily basis, the third party investment service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing. As the fair value estimates of the Company’s fixed maturity securities are based on observable market information rather than market quotes, the estimates of fair value on these fixed maturity securities are included in Level 2 of the hierarchy. The Company’s Level 2 investments include obligations of U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
The Company’s equity securities are included in Level 1 and Level 2 and the private placement common stocks and joint venture investment are included in Level 3. Level 1 for the equity securities classified as such is appropriate since they trade on a daily basis, are based on quoted market prices in active markets and are based upon unadjusted prices. Level 2 for those equity securities classified as such is appropriate since they are not actively traded.
The Company’s fixed maturity available-for-sale securities and equity securities are highly liquid and allows for a high percentage of the portfolio to be priced through pricing services.
The change in the fair value of the Company’s Level 3 equity securities available-for-sale for the six months ended June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Beginning balance |
$ | $ | ||||||
|
Joint venture investment |
||||||||
|
Joint venture net income |
||||||||
|
Joint venture distribution |
( |
) | ( |
) | ||||
|
Ending balance |
$ | $ | ||||||
3. Fair Value Measurements (continued)
The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of June 30, 2026 and December 31, 2025, and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:
Financial instruments disclosed, but not carried, at fair value:
|
Carrying |
Fair |
|||||||||||||||||||
|
Amount |
Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
|
June 30, 2026 (Unaudited) |
||||||||||||||||||||
|
Financial assets |
||||||||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Commercial |
$ | $ | $ | $ | $ | |||||||||||||||
|
Residential |
||||||||||||||||||||
|
Policy loans |
||||||||||||||||||||
|
Other long-term investments |
||||||||||||||||||||
|
Cash and cash equivalents |
||||||||||||||||||||
|
Accrued investment income |
||||||||||||||||||||
|
Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
|
Held in trust under coinsurance agreement |
||||||||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Commercial |
$ | $ | $ | $ | $ | |||||||||||||||
|
Cash and cash equivalents |
||||||||||||||||||||
|
Total financial assets held in trust under coinsurance agreement |
$ | $ | $ | $ | $ | |||||||||||||||
|
Policyholders' account balances |
$ | $ | $ | $ | $ | |||||||||||||||
|
Policy claims |
||||||||||||||||||||
|
Total financial liabilities |
$ | $ | $ | $ | $ | |||||||||||||||
|
December 31, 2025 |
||||||||||||||||||||
|
Financial assets |
||||||||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Commercial |
$ | $ | $ | $ | $ | |||||||||||||||
|
Residential |
||||||||||||||||||||
|
Policy loans |
||||||||||||||||||||
|
Other long-term investments |
||||||||||||||||||||
|
Cash and cash equivalents |
||||||||||||||||||||
|
Accrued investment income |
||||||||||||||||||||
|
Total financial assets |
$ | $ | $ | $ | $ | |||||||||||||||
|
Held in trust under coinsurance agreement |
||||||||||||||||||||
|
Mortgage loans on real estate |
||||||||||||||||||||
|
Commercial |
$ | $ | $ | $ | $ | |||||||||||||||
|
Cash and cash equivalents |
||||||||||||||||||||
|
Total financial assets held in trust under coinsurance agreement |
$ | $ | $ | $ | $ | |||||||||||||||
|
Financial liabilities |
||||||||||||||||||||
|
Policyholders' account balances |
$ | $ | $ | $ | $ | |||||||||||||||
|
Policy claims |
||||||||||||||||||||
|
Total financial liabilities |
$ | $ | $ | $ | $ | |||||||||||||||
3. Fair Value Measurements (continued)
The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment was required to interpret market data to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.
The following methods and assumptions were used in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto:
Fixed Maturity and Equity Securities
The fair value of fixed maturity securities and equity securities are based on the principles previously discussed as Level 1, Level 2 and Level 3.
Mortgage Loans on Real Estate
The fair values for mortgage loans are estimated using discounted cash flow analyses. For both residential and commercial mortgage loans, the discount rate used was indexed to the Secured Overnight Financing Rate.
Cash and Cash Equivalents, Short-Term Investments, Accrued Investment Income and Policy Loans
The carrying value of these financial instruments approximates their fair values. Cash and cash equivalents and short-term investments are included in Level 1 of the fair value hierarchy due to their highly liquid nature.
Other Long-Term Investments
Other long-term investments are primarily comprised of lottery prize receivables and fair value is derived by using a discounted cash flow approach. Projected cash flows are discounted using the average FTSE Pension Liability Index in effect at the end of each period.
Investment Contracts – Policyholders’ Account Balances
The fair value for liabilities under investment-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.
The fair values for insurance contracts other than investment-type contracts are not required to be disclosed.
Policy Claims
The carrying amounts reported for these liabilities approximate their fair value.
4. Segment Data
The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment. These segments as of June 30, 2026 and December 31, 2025 and for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
Life insurance operations |
$ | $ | $ | $ | ||||||||||||
|
Annuity operations |
||||||||||||||||
|
Corporate operations |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) before income taxes: |
||||||||||||||||
|
Life insurance operations |
$ | $ | $ | $ | ||||||||||||
|
Annuity operations |
( |
) | ( |
) | ( |
) | ||||||||||
|
Corporate operations |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Depreciation and amortization expense: |
||||||||||||||||
|
Life insurance operations |
$ | $ | $ | $ | ||||||||||||
|
Annuity operations |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
(Unaudited) |
||||||||||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||||||||||
|
Assets: |
||||||||||||||||
|
Life insurance operations |
$ | $ | ||||||||||||||
|
Annuity operations |
||||||||||||||||
|
Corporate operations |
||||||||||||||||
|
Total |
$ | $ | ||||||||||||||
4. Segment Data (continued)
The increases and decreases of revenues and profitability from our business segments for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
( |
) | ( |
) | ( |
) | ||||||||||
|
Net realized investment gains and loss on impairments |
( |
) | ( |
) | ( |
) | ||||||||||
|
Service fees and other income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Total revenue |
( |
) | ( |
) | ( |
) | ||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ( |
) | ||||||||||
|
Amortization of value of insurance business acquired |
( |
) | ( |
) | ( |
) | ||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
( |
) | ( |
) | ||||||||||||
|
Total expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Total benefits, claims and expenses |
( |
) | ||||||||||||||
|
Income (loss) before federal income taxes |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
The increases and decreases of revenues and profitability from our business segments for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
||||||||||||||||
|
Net realized investment gains and loss on impairments |
( |
) | ( |
) | ( |
) | ||||||||||
|
Service fees and other income |
( |
) | ( |
) | ( |
) | ||||||||||
|
Total revenue |
( |
) | ( |
) | ( |
) | ||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ( |
) | ||||||||||
|
Amortization of value of insurance business acquired |
( |
) | ( |
) | ( |
) | ||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
( |
) | ( |
) | ( |
) | ||||||||||
|
Total expenses |
( |
) | ( |
) | ( |
) | ||||||||||
|
Total benefits, claims and expenses |
( |
) | ( |
) | ||||||||||||
|
Income (loss) before federal income taxes (benefits) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
4. Segment Data (continued)
The Company conducts and manages its business through reporting business segments. The two reporting segments representing the major lines of business, are: (1) Life Insurance Operations and (2) Annuity Operations. The third reporting business segment is Corporate Operations that represents the activities of the financial holding companies that own all consolidated subsidiaries and include excess assets that are invested primarily in mortgage loan activities. The Company allocates the impact of corporate-level transactions to all three reporting segments, consistent with the basis for management's evaluation of the results of those reporting segments.
The accounting policies of the reporting segments are the same as those described in Note 1 - Organization and Significant Accounting Policies. Business segment allocations are based on certain assumptions and estimates primarily related to asset and liability holdings and revenue and cost activity with methodologies applied consistently from year-to-year. Stated segment operating results would change if different methods were applied.
The Company’s Chief Executive Officer is the chief operating decision maker (CODM), responsible for reviewing financial performance and making decisions regarding the allocation of resources for the reporting segments. The Company measures and analyzes segment performance based on earnings focused on investment yield, mortality of life insurance operations, interest assumptions inherent in life insurance future policy benefits, policyholders’ balances interest crediting rates and relative ratios of commission to life insurance premiums and annuity deposits as presented in our consolidated statements of operations. FTFC believes that U.S. GAAP earnings before federal income taxes is an appropriate indicator of the profitability and underlying trends in our life insurance and annuity business. The CODM considers actual-to-budget variances in U.S. GAAP earnings on a quarterly basis when making decisions about allocating capital and personnel to segments and evaluating product pricing.
Disaggregated financial information for these segments, as regularly provided to the CODM, for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||||||
|
Three Months Ended June 30, 2026 |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
||||||||||||||||
|
Net realized investment losses |
( |
) | ( |
) | ( |
) | ||||||||||
|
Service fees and other income |
||||||||||||||||
|
Total revenue |
||||||||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ( |
) | ||||||||||
|
Amortization of value of insurance business acquired |
||||||||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
||||||||||||||||
|
Total expenses |
||||||||||||||||
|
Total benefits, claims and expenses |
||||||||||||||||
|
Income before federal income tax expense |
$ | $ | ( |
) | $ | $ | ||||||||||
4. Segment Data (continued)
|
(Unaudited) |
||||||||||||||||
|
Three Months Ended June 30, 2025 |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
||||||||||||||||
|
Net realized investment gains and loss on impairments |
( |
) | ( |
) | ( |
) | ||||||||||
|
Service fees and other income |
||||||||||||||||
|
Total revenue |
||||||||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ||||||||||||
|
Amortization of value of insurance business acquired |
||||||||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
||||||||||||||||
|
Total expenses |
||||||||||||||||
|
Total benefits, claims and expenses |
||||||||||||||||
|
Income before federal income tax expense |
$ | $ | $ | $ | ||||||||||||
|
(Unaudited) |
||||||||||||||||
|
Six Months Ended June 30, 2026 |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
||||||||||||||||
|
Net realized investment gains |
||||||||||||||||
|
Service fees and other income |
||||||||||||||||
|
Total revenue |
||||||||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ( |
) | ||||||||||
|
Amortization of value of insurance business acquired |
||||||||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
||||||||||||||||
|
Total expenses |
||||||||||||||||
|
Total benefits, claims and expenses |
||||||||||||||||
|
Income before federal income tax expense |
$ | $ | ( |
) | $ | $ | ||||||||||
4. Segment Data (continued)
|
(Unaudited) |
||||||||||||||||
|
Six Months Ended June 30, 2025 |
||||||||||||||||
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | $ | $ | $ | ||||||||||||
|
Net investment income |
||||||||||||||||
|
Net realized investment gains and loss on impairments |
||||||||||||||||
|
Service fees and other income |
||||||||||||||||
|
Total revenue |
||||||||||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
||||||||||||||||
|
Death benefits |
||||||||||||||||
|
Surrenders |
||||||||||||||||
|
Interest credited to policyholders |
||||||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
||||||||||||||||
|
Total benefits and claims |
||||||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
( |
) | ( |
) | ||||||||||||
|
Amortization of value of insurance business acquired |
||||||||||||||||
|
Commissions |
||||||||||||||||
|
Other underwriting, insurance and acquisition expenses |
||||||||||||||||
|
Total expenses |
||||||||||||||||
|
Total benefits, claims and expenses |
||||||||||||||||
|
Income before federal income tax expense |
$ | $ | ( |
) | $ | $ | ||||||||||
5. Federal Income Taxes
The provision for federal income taxes is based on the asset and liability method of accounting for income taxes. Deferred income taxes are provided for the cumulative temporary differences between balances of assets and liabilities determined under GAAP and the balances using tax bases.
The Company has no known uncertain tax benefits within its provision for income taxes. In addition, the Company does not believe it would be subject to any penalties or interest relative to any open tax years and, therefore, has not accrued any such amounts. The Company files U.S. federal income tax returns and income tax returns in various state jurisdictions. The through 2024 U.S. federal tax years are subject to income tax examination by tax authorities. The Company classifies any interest and penalties (if applicable) as income tax expense in the financial statements.
6. Contingent Liabilities
From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in pending lawsuits.
A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn styled First Trinity Financial Corporation and Gregg E. Zahn vs. C. Wayne Pettigrew and Group & Pension Planners was originally filed in 2013 in the District Court of Tulsa County, Oklahoma against former Company Board of Director, C. Wayne Pettigrew was settled with the defendant on April 14, 2025.
6. Contingent Liabilities (continued)
The Company, through its life insurance subsidiary, TLIC, commenced lawsuits as plaintiff, both in the New York Supreme Court, New York County, on June 29, 2020 and another on March 4, 2022, for breach of contract against a company for failure to advance funding to lottery ticket winners to the detriment of TLIC and against various of that company’s associated persons for unjust enrichment and fraud perpetuated on TLIC. The cases are entitled “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, and Monica L. Ray, Index No. 652780/2020” (New York Supreme Court, New York County) and “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, Julie Casal, and Monica L. Ray, Index No. 651023/2022” (New York Supreme Court, New York County). The Company is vigorously prosecuting this case against the defendants. The Company faces no exposure in connection with either action since no counterclaims or cross claims have been made against the Company. Management believes that these lawsuits are not material in relation to the Company’s financial position or results of operations.
Guaranty fund assessments, brought about by the insolvency of life and health insurers, are levied at the discretion of the various state guaranty fund associations to cover association obligations. In most states, guaranty fund assessments may be taken as a credit against premium taxes, typically over a five-year period.
7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income
The changes in the components of the Company’s accumulated other comprehensive income for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, 2026 and 2025 (Unaudited) |
||||||||||||
|
Remeasurement |
||||||||||||
|
Unrealized |
Gains on Future |
Accumulated |
||||||||||
|
Depreciation on |
Policy Benefits |
Other |
||||||||||
|
Available-For-Sale |
Related to |
Comprehensive |
||||||||||
|
Securities |
Discount Rate |
Income |
||||||||||
|
Balance as of April 1, 2026 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive loss before reclassifications, net of tax |
( |
) | ( |
) | ||||||||
|
Less amounts reclassified from accumulated other comprehensive income having no credit losses, net of tax |
||||||||||||
|
Other comprehensive loss |
( |
) | ( |
) | ||||||||
|
Balance as of June 30, 2026 |
$ | ( |
) | $ | $ | |||||||
|
Balance as of April 1, 2025 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive income before reclassifications, net of tax |
||||||||||||
|
Less amounts reclassified from accumulated other comprehensive income having no credit losses, net of tax |
( |
) | ( |
) | ||||||||
|
Other comprehensive income |
||||||||||||
|
Balance as of June 30, 2025 |
$ | ( |
) | $ | $ | |||||||
7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (continued)
|
Six Months Ended June 30, 2026 and 2025 (Unaudited) |
||||||||||||
|
Remeasurement |
||||||||||||
|
Unrealized |
Gains on Future |
Accumulated |
||||||||||
|
Depreciation on |
Policy Benefits |
Other |
||||||||||
|
Available-For-Sale |
Related to |
Comprehensive |
||||||||||
|
Securities |
Discount Rate |
Income |
||||||||||
|
Balance as of January 1, 2026 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive loss before reclassifications, net of tax |
( |
) | ( |
) | ||||||||
|
Less amounts reclassified from accumulated other comprehensive income having no credit losses, net of tax |
||||||||||||
|
Other comprehensive loss |
( |
) | ( |
) | ||||||||
|
Balance as of June 30, 2026 |
$ | ( |
) | $ | $ | |||||||
|
Balance as of January 1, 2025 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive income before reclassifications, net of tax |
( |
) | ||||||||||
|
Less amounts reclassified from accumulated other comprehensive income having no credit losses, net of tax |
||||||||||||
|
Other comprehensive income |
( |
) | ||||||||||
|
Balance as of June 30, 2025 |
$ | ( |
) | $ | $ | |||||||
The pretax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit) for each component for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, 2026 (Unaudited) |
||||||||||||
|
Income Tax |
||||||||||||
|
Pretax |
Expense (Benefit) |
Net of Tax |
||||||||||
|
Other comprehensive loss: |
||||||||||||
|
Change in net unrealized gains on available-for-sale securities: |
||||||||||||
|
Unrealized holding gains arising during the period |
$ | $ | $ | |||||||||
|
Reclassification adjustment for net gains included in operations having no credit losses |
||||||||||||
|
Net unrealized gains on investments |
||||||||||||
|
Remeasurement loss on future policy benefits related to discount rate |
( |
) | ( |
) | ( |
) | ||||||
|
Total other comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Three Months Ended June 30, 2025 (Unaudited) |
||||||||||||
|
Income Tax |
||||||||||||
|
Pretax |
Expense (Benefit) |
Net of Tax |
||||||||||
|
Other comprehensive income: |
||||||||||||
|
Change in net unrealized gains on available-for-sale securities: |
||||||||||||
|
Unrealized holding gains arising during the period |
$ | $ | $ | |||||||||
|
Reclassification adjustment for net losses included in operations having no credit losses |
( |
) | ( |
) | ( |
) | ||||||
|
Net unrealized gains on investments |
||||||||||||
|
Remeasurement gains on future policy benefits related to discount rate |
||||||||||||
|
Total other comprehensive income |
$ | $ | $ | |||||||||
7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (continued)
|
Six Months Ended June 30, 2026 (Unaudited) |
||||||||||||
|
Income Tax |
||||||||||||
|
Pretax |
Expense (Benefit) |
Net of Tax |
||||||||||
|
Other comprehensive loss: |
||||||||||||
|
Change in net unrealized losses on available-for-sale securities: |
||||||||||||
|
Unrealized holding losses arising during the period |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Reclassification adjustment for net gains included in operations having no credit losses |
||||||||||||
|
Net unrealized losses on investments |
( |
) | ( |
) | ( |
) | ||||||
|
Remeasurement loss on future policy benefits related to discount rate |
||||||||||||
|
Total other comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Six Months Ended June 30, 2025 (Unaudited) |
||||||||||||
|
Income Tax |
||||||||||||
|
Pretax |
Expense (Benefit) |
Net of Tax |
||||||||||
|
Other comprehensive income: |
||||||||||||
|
Change in net unrealized gains on available-for-sale securities: |
||||||||||||
|
Unrealized holding gains arising during the period |
$ | $ | $ | |||||||||
|
Reclassification adjustment for net gains included in operations having no credit losses |
||||||||||||
|
Net unrealized gains on investments |
||||||||||||
|
Remeasurement loss on future policy benefits related to discount rate |
( |
) | ( |
) | ( |
) | ||||||
|
Total other comprehensive income |
$ | $ | $ | |||||||||
Realized gains and losses on the sales of investments are determined based upon the specific identification method and include provisions for other-than-temporary impairments where appropriate.
The pretax and the related income tax components of the amounts reclassified from the Company’s accumulated other comprehensive income to the Company’s consolidated statement of operations for the three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
Reclassification Adjustments |
2026 |
2025 |
2026 |
2025 |
||||||||||||
|
Unrealized losses on available-for-sale securities having no credit losses: |
||||||||||||||||
|
Realized gains (losses) on sales of securities (a) |
$ | $ | ( |
) | $ | $ | ||||||||||
|
Income tax expense (benefit) (b) |
( |
) | ||||||||||||||
|
Total reclassification adjustments |
$ | $ | ( |
) | $ | $ | ||||||||||
(a)
(b)
8. Allowance for Loan Losses from Mortgage Loans on Real Estate
As of June 30, 2026, $
As of December 31, 2025, $
As of June 30, 2026, the Company’s Chairman, President and Chief Executive Officer has provided approximately $
The balances of and changes in the Company’s credit losses related to mortgage loans on real estate as of and for the three and six months ended June 30, 2026 and 2025 are summarized as follows (excluding $
|
(Unaudited) |
||||||||||||||||||||||||
|
Three Months Ended June 30, |
||||||||||||||||||||||||
|
Residential Mortgage Loans |
Commercial Mortgage Loans |
Total |
||||||||||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
|||||||||||||||||||
|
Allowance, beginning |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Charge offs |
||||||||||||||||||||||||
|
Recoveries |
||||||||||||||||||||||||
|
Provision |
||||||||||||||||||||||||
|
Allowance, ending |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Allowance, ending: |
||||||||||||||||||||||||
|
Individually evaluated for impairment |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Collectively evaluated for impairment |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Carrying Values: |
||||||||||||||||||||||||
|
Individually evaluated for reserve allowance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Collectively evaluated for reserve allowance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
8. Allowance for Loan Losses from Mortgage Loans on Real Estate (continued)
|
(Unaudited) |
||||||||||||||||||||||||
|
Six Months Ended June 30, |
||||||||||||||||||||||||
|
Residential Mortgage Loans |
Commercial Mortgage Loans |
Total |
||||||||||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
|||||||||||||||||||
|
Allowance, beginning |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Charge offs |
||||||||||||||||||||||||
|
Recoveries |
||||||||||||||||||||||||
|
Provision |
( |
) | ||||||||||||||||||||||
|
Allowance, ending |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Allowance, ending: |
||||||||||||||||||||||||
|
Individually evaluated for impairment |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Collectively evaluated for impairment |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Carrying Values: |
||||||||||||||||||||||||
|
Individually evaluated for reserve allowance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Collectively evaluated for reserve allowance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company utilizes the ratio of the carrying value of individual mortgage loans compared to the individual appraisal value to evaluate the credit quality of its mortgage loans on real estate (commonly referred to as the loan-to-value ratio). The Company’s residential and commercial mortgage loans on real estate by credit quality using this ratio as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
Residential Mortgage Loans |
Commercial Mortgage Loans |
Total Mortgage Loans |
||||||||||||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
||||||||||||||||||||||
|
Loan-To-Value Ratio |
June 30, 2026 |
December 31, 2025 |
June 30, 2026 |
December 31, 2025 |
June 30, 2026 |
December 31, 2025 |
||||||||||||||||||
|
Over 70% to 80% |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Over 60% to 70% |
||||||||||||||||||||||||
|
Over 50% to 60% |
||||||||||||||||||||||||
|
Over 40% to 50% |
||||||||||||||||||||||||
|
Over 30% to 40% |
||||||||||||||||||||||||
|
Over 20% to 30% |
||||||||||||||||||||||||
|
Over 10% to 20% |
||||||||||||||||||||||||
|
10% or less |
||||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
9. Deferred Policy Acquisition Costs
Incremental direct costs of insurance contract acquisition as well as certain costs that vary with and are directly related to acquisition activities (underwriting, policy issuance and processing, medical and inspection and sales force contract selling) for the successful acquisition of new and renewal insurance policies and annuity contracts are capitalized in the period they are incurred. Maintenance costs and acquisition costs that are not deferrable are charged to operating expenses as incurred.
For our long-duration insurance products and annuity contracts, deferred policy acquisition costs are amortized on a constant level basis over the expected life of the contracts using groupings and assumptions consistent with those used in computing policyholder liabilities. For each of our long-duration insurance products, the Company selects the number of policies inforce measure as a basis for amortization that will result in a constant level amortization pattern for the expected life of the contract. If the Company’s actual contract terminations differ from our expectation, the amortization pattern is adjusted on a prospective basis.
Some of the Company’s life and annuity products have renewal commissions resulting in new deferred policy acquisition cost capitalizations in the years following the initial capitalization. The new capitalizations are added to the existing deferred policy acquisition cost balance when incurred and amortized over the remaining life of the insurance products impacted.
The Company reviews and updates actuarial experience assumptions (such as mortality, surrenders, lapse, and premium persistency) serving as inputs to the models that establish the expected life for deferred policy acquisition costs and other actuarial balances during the third quarter of each year, or more frequently if evidence suggests assumptions should be revised. The Company makes model refinements as necessary, and any changes resulting from these assumption updates are applied prospectively.
The disaggregated amounts of net deferred policy acquisition costs (amount capitalized and amount amortized) allocated to the Company’s life and annuity segments that reconcile to the total amounts reported in the consolidated statements of operations for three and six months ended June 30, 2026 and 2025 are summarized as follows:
|
Deferred Policy Acquisition Cost Capitalized |
||||||||||||||||
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Life |
$ | $ | $ | $ | ||||||||||||
|
Annuity |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Deferred Policy Acquisition Cost Amortized |
||||||||||||||||
|
Three Months Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Life |
$ | $ | $ | $ | ||||||||||||
|
Annuity |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
9. Deferred Policy Acquisition Costs (continued)
The balances and changes in deferred policy acquisition costs (deferral and amortization) allocated to the Company’s life and annuity segments that reconcile to the total amounts reported in the consolidated statement of financial position and consolidated statement of operations as of and for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) Six Months Ended June 30, 2026 |
||||||||||||
|
Life |
Annuity |
Total |
||||||||||
|
Deferred policy acquisition costs, beginning |
$ | $ | $ | |||||||||
|
Capitalized |
||||||||||||
|
Amortized |
( |
) | ( |
) | ( |
) | ||||||
|
Increase (decrease) |
||||||||||||
|
Deferred policy acquisition costs, ending |
$ | $ | $ | |||||||||
|
(Unaudited) Six Months Ended June 30, 2025 |
||||||||||||
|
Life |
Annuity |
Total |
||||||||||
|
Deferred policy acquisition costs, beginning |
$ | $ | $ | |||||||||
|
Capitalized |
||||||||||||
|
Amortized |
( |
) | ( |
) | ( |
) | ||||||
|
Increase (decrease) |
( |
) | ||||||||||
|
Deferred policy acquisition costs, ending |
$ | $ | $ | |||||||||
10. Liability for Future Policy Benefits
Future policy benefits include reserves for long-duration contracts as well as certain reinsurance balances when in a liability position.
The balances and changes in the liability for future policy benefits meeting ASU 2018-12 standards as of and for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) June 30, 2026 |
(Unaudited) June 30, 2025 |
|||||||||||||||
|
Present Value of Net Premiums |
Present Value of Benefits |
Present Value of Net Premiums |
Present Value of Benefits |
|||||||||||||
|
Balance, beginning of year |
$ | $ | $ | $ | ||||||||||||
|
Effect of changes in discount rate |
||||||||||||||||
|
Beginning balance at original discount rate |
$ | $ | $ | $ | ||||||||||||
|
Effect of changes in cash flow considerations |
||||||||||||||||
|
Effect of actual variances from expected |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Trued-Up balance |
$ | $ | $ | $ | ||||||||||||
|
New issuances |
||||||||||||||||
|
Net premium collected |
( |
) | - | ( |
) | - | ||||||||||
|
Interest accrual |
||||||||||||||||
|
Withdrawal/surrenders |
- | ( |
) | - | ( |
) | ||||||||||
|
Benefit payments |
- | ( |
) | - | ( |
) | ||||||||||
|
Ending balance at original discount rate |
$ | $ | $ | $ | ||||||||||||
|
Effect of changes in discount rate |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Balance, end of year |
$ | $ | $ | $ | ||||||||||||
|
Reinsurance recoverable |
$ | $ | ||||||||||||||
|
Net liability for future policy benefits |
$ | $ | ||||||||||||||
|
Deferred profit liability |
$ | $ | ||||||||||||||
The composition of future policy benefits as of June 30, 2026 and December 31, 2025 is summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Future policy benefits meeting ASU 2018-12 standards |
$ | $ | ||||||
|
Reinsurance recoverable |
( |
) | ( |
) | ||||
|
Subtotal |
||||||||
|
Deferred profit liability |
||||||||
|
Total future policy benefits meeting ASU 2018-12 standards |
||||||||
|
Future policy benefits not meeting ASU 2018-12 standards: |
||||||||
|
Participating life insurance contracts not on contribution basis |
||||||||
|
Reduced paid up and extended term life insurance contracts |
||||||||
|
Other |
||||||||
|
Total future policy benefits not meeting ASU 2018-12 standards |
||||||||
|
Future policy benefit reinsurance ceded |
||||||||
|
Total future policy benefits |
$ | $ | ||||||
10. Liability for Future Policy Benefits (continued)
The undiscounted expected future benefit payments and gross premiums as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) June 30, 2026 |
||||||||||||
|
Undiscounted |
Original Present Value |
Current Present Value |
||||||||||
|
Gross premiums |
$ | $ | $ | |||||||||
|
Benefits |
||||||||||||
|
December 31, 2025 |
||||||||||||
|
Undiscounted |
Original Present Value |
Current Present Value |
||||||||||
|
Gross premiums |
$ | $ | $ | |||||||||
|
Benefits |
||||||||||||
The weighted-average interest rates as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
||||
|
June 30, 2026 |
||||
|
Weighted-average interest rate |
||||
|
Original discount rate |
% | |||
|
Current discount rate |
% | |||
|
December 31, 2025 |
||||
|
Weighted-average interest rate |
||||
|
Original discount rate |
% | |||
|
Current discount rate |
% | |||
The weighted-average durations of the liability as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) June 30, 2026 |
||||
|
Weighted-average duration of the liability |
||||
|
Original duration of the liability in years |
||||
|
Current duration of the liability in years |
||||
|
December 31, 2025 |
||||
|
Weighted-average duration of liability |
||||
|
Original duration of the liability in years |
||||
|
Current duration of the liability in years |
||||
10. Liability for Future Policy Benefits (continued)
The actual experience during the six months ended June 30, 2026 and 2025 compared to what was expected for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) June 30, 2026 |
||||||||||||||||
|
Amount Inforce |
Mortality |
Lapsation |
Total |
|||||||||||||
|
Expected |
$ | $ | $ | $ | ||||||||||||
|
Expected rate |
% | % | % | |||||||||||||
|
Actual |
$ | $ | $ | $ | ||||||||||||
|
Actual rate |
% | % | % | |||||||||||||
|
Actual to expected ratio |
% | % | % | |||||||||||||
|
(Unaudited) June 30, 2025 |
||||||||||||||||
|
Amount Inforce |
Mortality |
Lapsation |
Total |
|||||||||||||
|
Expected |
$ | $ | $ | $ | ||||||||||||
|
Expected rate |
% | % | % | |||||||||||||
|
Actual |
$ | $ | $ | $ | ||||||||||||
|
Actual rate |
% | % | % | |||||||||||||
|
Actual to expected ratio |
% | % | % | |||||||||||||
11. Policyholders’ Account Balances
Policyholders’ Account Balances include annuity contracts and deposit-type liabilities that are composed of supplemental contracts without life contingencies, premium deposit funds, premium growth funds and dividend accumulation funds that are all included in the annuity segment of the Company’s operations.
The composition of annuities and deposit-type liabilities included in Policyholders’ Account Balances as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Annuity |
$ | $ | ||||||
|
Deposit-type liabilities |
||||||||
|
Dividend accumulations |
||||||||
|
Supplemental contracts with out life contingencies |
||||||||
|
Premium growth funds |
||||||||
|
Premium deposit funds |
||||||||
|
Total deposit-type liabilities |
||||||||
|
Total Policyholders' account balances' |
$ | $ | ||||||
11. Policyholders’ Account Balances (continued)
The range of crediting rates for policyholders’ account balances compared to the guaranteed minimum crediting rates as of June 30, 2026 and December 31, 2025 are presented as follows:
|
(Unaudited) June 30, 2026 |
|||||||||||||||||||||
|
Range of Guaranteed Minimum Crediting Rates |
At Guaranteed Minimum |
1 Basis Point to 50 Basis Points Above Guaranteed Minimum |
51 Basis Point to 150 Basis Points Above Guaranteed Minimum |
Greater Than 150 Basis Points Above Guaranteed Minimum |
Total |
||||||||||||||||
|
Less than 2.00% |
$ | $ | $ | $ | $ | ||||||||||||||||
| 2.00% to 2.99% | |||||||||||||||||||||
| 3.00% to 3.99% | |||||||||||||||||||||
|
Greater than 4.00% |
( |
) | |||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | ||||||||||||||||
|
December 31, 2025 |
|||||||||||||||||||||
|
Range of Guaranteed Minimum Crediting Rates |
At Guaranteed Minimum |
1 Basis Point to 50 Basis Points Above Guaranteed Minimum |
51 Basis Point to 150 Basis Points Above Guaranteed Minimum |
Greater Than 150 Basis Points Above Guaranteed Minimum |
Total |
||||||||||||||||
|
Less than 2.00% |
$ | $ | $ | $ | $ | ||||||||||||||||
| 2.00% to 2.99% | |||||||||||||||||||||
| 3.00% to 3.99% | |||||||||||||||||||||
|
Greater than 4.00% |
( |
) | |||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | ||||||||||||||||
Reconciliations of policyholders' account balances with guaranteed minimum crediting rates to total policyholders' account balances as of June 30, 2026 and December 31, 2025, are presented as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
December 31, 2025 |
|||||||
|
Policyholders' account balances with guaranteed minimum crediting rates |
||||||||
|
Deposit-type liabilities |
||||||||
|
Policyholders' account balances ceded |
||||||||
|
Accrued interest credited to policyholders' account balances |
||||||||
|
Total additions |
||||||||
|
Total policyholders' account balances |
||||||||
11. Policyholders’ Account Balances (continued)
The change in the policyholders account balances for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||
|
June 30, 2026 |
June 30, 2025 |
|||||||
|
Policyholders' account balances, beginning |
$ | $ | ||||||
|
Deposits |
||||||||
|
Withdrawals |
( |
) | ( |
) | ||||
|
Funds withheld under coinsurance agreement |
||||||||
|
Interest credited |
||||||||
|
Increase (decrease) |
||||||||
|
Policyholders' account balances, ending |
$ | $ | ||||||
|
Weighted Average Crediting Rate |
% | % | ||||||
|
Cash surrender value |
$ | $ | ||||||
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
First Trinity Financial Corporation (“we” “us”, “our”, “FTFC” or the “Company”) conducts operations as an insurance holding company emphasizing ordinary life insurance products and annuity contracts in niche markets.
As an insurance provider, we collect premiums in the current period to pay future benefits to our policy and contract holders. Our core TLIC and FBLIC operations include issuing modified premium whole life insurance with a flexible premium deferred annuity, ordinary whole life, final expense, term and annuity products to predominantly middle income households in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia through independent agents.
We also realize revenues from our investment portfolio, which is a key component of our operations. The revenues we collect as premiums from policyholders are invested to ensure future benefit payments under the policy contracts. Life insurance companies earn profits on the investment spread, which reflects the investment income earned on the premiums paid to the insurer between the time of receipt and the time benefits are paid out under policies. Changes in interest rates, changes in economic conditions and volatility in the capital markets can all impact the amount of earnings that we realize from our investment portfolio.
Acquisitions
The Company expects to facilitate growth through acquisitions of other life insurance companies and/or blocks of life insurance and annuity business.
In late December 2008, the Company completed its acquisition of 100% of the outstanding stock of FLAC for $2,500,000 and had additional acquisition related expenses of $195,234.
In late December 2011, the Company completed its acquisition of 100% of the outstanding stock of FBLIC for $13,855,129.
On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement and assumed liabilities of $3,055,916.
In 2019, FTFC’s acquisition of TAI for $250,000 was approved by the Barbados, West Indies regulators.
Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The aggregate purchase price of K-TENN was $1,746,240.
On January 4, 2022, FTFC acquired RCLIC from Royalty in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance approved FTFC’s contribution and merger of RCLIC into FBLIC.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition, results of operations and liquidity and capital resources is based on our consolidated financial statements that have been prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We evaluate our estimates and assumptions continually, including those related to investments, deferred acquisition costs, allowance for loan losses from mortgages, value of insurance business acquired, policy liabilities, regulatory requirements, contingencies and litigation. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a description of the Company’s critical accounting policies and estimates, please refer to “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The Company considers its most critical accounting estimates to be those applied to investments in fixed maturities securities, mortgage loans on real estate, deferred policy acquisition costs, value of insurance business acquired and future policy benefits. There have been no material changes to the Company’s critical accounting policies and estimates since December 31, 2025.
Cybersecurity
The Company has established and continues to enhance its cybersecurity enterprise risk management program. The Company’s executive team meets formally at least monthly, and informally as needed, to set and maintain a strategy focused on achieving a high level of cybersecurity protection. The Company’s executive management team makes quarterly reports to the Company’s Board of Directors and Audit Committee.
The Company’s executive management team is enhanced by the inclusion of an information technology external consultant to advise the Company’s executive management team and to focus on developing and maintaining external and internal cybersecurity. Working with Company executives and staff, the information technology consultant advises and helps the Company implement its strategy with respect to:
|
● |
Computer hardware and software, |
|
● |
Security access, logging and user termination, |
|
● |
In house and remote user access – user accounts, password protection, authentication, monitoring usage, intrusion detection, incident identification and related controls, |
|
● |
Encryption, |
|
● |
System change control, |
|
● |
Data back up and remote sites, |
|
● |
Data recovery, |
|
● |
And Disaster recovery |
The Company also utilizes training to foster an environment of information security awareness, training and education. Beyond making employees aware of its cybersecurity risk management program, strategy and governance, this training also introduces all employees to many types of cybersecurity risks to introduce skepticism and enhance skills to identify and report potential situations encountered to the executive management team for further assessment.
Adopted Accounting Standards
Improvements to Income Tax Disclosures
In December 2023, the FASB issued amendments (Accounting Standards Update 2023-09) to enhance the transparency and decision usefulness of income tax disclosures. The amendments required that public business entities on an annual basis disclose information about taxes paid and a tabular reconciliation using both percentages and amounts of specific categories in the rate reconciliation. In addition, separate disclosure was required for any reconciling item equal to or greater than five (5) percent of the amount computed by multiplying the income or loss from continuing operations before income taxes by the statutory income tax rate. If not otherwise evident, a public business entity was required to provide an explanation of the individual reconciling items such as the nature, effect and causes of the reconciling items.
The Company adopted this Update and prescribed disclosures for year-end 2025 in accordance with the required effective date. The Company also disclosed the information required by this Update for 2024 year-end reporting. The Company disclosed and will continue to disclose annually the supplementary information for taxes paid (recovered). Interim and annual periods will not disclose income (loss) from continuing operations before tax for domestic and foreign operations but will show the impact of foreign operating losses in the rate reconciliation. In addition, the total amounts of interest and penalties, if any, included in operating results and accrued in the statement of financial position will be disclosed. The Company will not disclose rate reconciliations on an interim basis unless there is a significant change in the Company’s estimated annual effective tax rate compared to the effective tax rate from the prior annual reporting period. If there is a significant change, the Company will disclose the reason for the significant change to the estimated annual effective tax rate.
Since FTFC is a holding company for life insurance and mortgage loan operations, FTFC pays premium taxes and very limited amounts of franchise taxes to states that are not based on allocated amounts of net income (loss). The Company only pays state income taxes on the stand-alone taxable income of FTFC and TMC operations domiciled and operating in the state of Oklahoma. In addition, FTFC pays no foreign taxes or recovers any foreign losses on its operations outside the United States. Based upon these facts, FTFC will not present disaggregated information for state taxes and foreign operations in its disclosures of federal income and other taxes but will have a rate reconciling item for non-taxable foreign tax income or losses. The adoption of this guidance in 2025 did not have a material effect on the Company’s results of operations, financial position or liquidity.
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued updated guidance, Accounting Standards Update 2018-12 (ASU 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The objective of this Update was to improve the timeliness of recognizing changes in the liability for future policy benefits, modified the rate used to discount future cash flows, simplified and improved accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplified the amortization of deferred acquisitions costs and expanded required disclosures.
The expanded disclosure required an insurance entity to provide disaggregated roll forwards of beginning to ending balances of the following: liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs including disclosure about, changes to and effect of changes for significant inputs, judgments, assumptions and methods used in measurements.
The Company adopted ASU 2018-12 on January 1, 2025 for the liability for its non-participating future policy benefits and deferred policy acquisition costs but initially reported and disclosed this adoption with the Company’s December 31, 2025 financial statements in accordance with the guidelines of the pronouncement. The Company’s 2025 quarterly financial statements were not required to adopt this guidance, but those 2025 quarterly financial statements will be restated in 2026 in accordance with the provisions of the Update.
ASU 2018-12 was adopted on a modified retrospective basis such that those balances for the liability for future policy benefits, deferred policy acquisition costs were adjusted to conform to ASU 2018-12 effective January 1, 2024 (i.e., the earliest period presented at adoption). With respect to an analysis for market risk benefits, the Company concluded that it had no market-based options or guarantees associated with its liability for policyholders’ account balances. The financial impact of this guidance on the Company’s 2023, 2024 and 2025 results of operations, financial position and liquidity were reported and disclosed in the Company’s December 31, 2025 financial statements.
The increase (decrease) on the impacted caption in the consolidated statement of operations and consolidated statement of comprehensive income related to the restatement adjustments of ASU 2018-12 for the six months ended June 30, 2025, is summarized as follows:
|
As Previously |
ASU 2018-12 |
Post ASU 2018-12 |
||||||||||
|
Financial Statement Caption |
Reported |
Adoption Impact |
Adoption |
|||||||||
|
Consolidated Statements of Operations |
Six Months Ended June 30, 2025 |
|||||||||||
|
Increase in future policy benefits |
$ | 7,143,671 | $ | (755,805 | ) | $ | 6,387,866 | |||||
|
Amortization of deferred policy acquisition costs |
5,193,070 | (452,155 | ) | 4,740,915 | ||||||||
|
Amortization of value of insurance business acquired |
91,783 | 94,289 | 186,072 | |||||||||
|
Deferred federal income tax expense |
(124,295 | ) | 233,871 | 109,576 | ||||||||
|
Net income |
3,063,551 | 879,800 | 3,943,351 | |||||||||
|
Net income per common share: |
||||||||||||
|
Class A |
$ | 0.3235 | $ | 0.0929 | $ | 0.4164 | ||||||
|
Class B |
0.2750 | 0.0789 | 0.3539 | |||||||||
|
Consolidated Statements of Comprehensive Income |
Six Months Ended June 30, 2025 |
|||||||||||
|
Net income |
$ | 3,063,551 | $ | 879,800 | $ | 3,943,351 | ||||||
|
Adjustment to deferred acquisition costs |
1,162 | (1,162 | ) | - | ||||||||
|
Remeasurement gains on future policy benefit related to discount rate |
- | (556,033 | ) | (556,033 | ) | |||||||
|
Federal income tax expense (benefit) |
929,564 | (116,523 | ) | 813,041 | ||||||||
|
Total other comprehensive income |
3,496,933 | (438,348 | ) | 3,058,585 | ||||||||
|
Total comprehensive income |
6,560,484 | 441,452 | 7,001,936 | |||||||||
Recent Accounting Pronouncements
Expense Disaggregation Disclosures
In November 2024, the FASB issued amendments (Accounting Standards Update 2024-03) to disclose more granular information about costs of sales and general and administrative expenses including employee compensation to improve the disclosure about a public enterprise’s expenses by providing more detailed information about the types of expenses commonly presented in expense captions such as costs of sales and general and administrative expenses.
The amendments in this Update require disclosing, in the notes to the financial statements, the following specified information about costs and expenses included in general captions on the face of the financial statements at each interim and annual reporting period of the entity: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil and gas producing activities or other amounts of depletion expenses.
An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In addition, the amendments in this Update do not change or remove current expense disclosure requirements including those of specialized industries.
The amendments to this Update are effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2027 and interim reporting beginning in first quarter 2028.
In January 2025, the FASB issued Accounting Standards Update 2025-01 that amended Accounting Standards Update 2024-03 to clarify the effective date of the original pronouncement regarding Expense Disaggregation Disclosures. The FASB’s intent in Accounting Standards Update 2024-03 was that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The FASB acknowledges, however, that there was ambiguity that only potentially affected non-calendar year-end entities when Accounting Standards Update 2024-03 was issued.
The amendment in this pronouncement amends the effective date of Accounting Standards Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Accounting Standards Update 2024-03 is permitted. This amendment does not impact the Company.
Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity
In May 2025, the FASB issued amendments (Accounting Standards Update 2025-03) to revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a Variable Interest Entity (“VIE” defined as a legal structure in which controlling interest is determined by something other than majority voting rights and controlling interest is arranged via a contractual relationship rather than through direct ownership) that meets the definition of a business. This amendment requires that the following factors be considered when a VIE is involved to determine which entity is the accounting acquirer:
a. If the business combination is effected primarily by transferring cash or other assets or incurring liabilities, the acquirer is usually the entity that transfers the cash or other assets or incurs the liabilities.
b. Other than a reverse acquisition, if the business combination is effected primarily by exchanging equity interests, the acquirer is usually the entity that issues its equity interests.
c. The acquirer is usually the entity that receives the largest portion of the voting rights of the combined entity.
d. If no owner has a majority voting interest, the acquirer is usually the individual or group that owns the largest minority interest of the combined entity.
e. The acquirer is usually the individual or group that has the ability to elect, appoint or remove members of the combined entity.
f. The acquirer is usually the individual or group that dominates management of the combined entity.
g. The acquirer is usually the individual or group that pays a premium over the pre-combination fair value of the other combined entity or entities.
h. The acquirer is usually the individual or group whose relative size in terms of assets, revenues, earnings or some other measure is significantly larger than the other combining entity or entities.
i. In a business combination involving more than two entities, the acquirer is usually the entity that initiated the combination and is significantly larger than the other combining entity or entities.
The amendments in this guidance are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued (or made available for issuance). If an entity adopts these amendments in an interim reporting period, it shall adopt as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period.
An entity shall apply this guidance on a prospective basis to all business combinations that have an acquisition date that occurs on or after the date of initial application. An entity shall disclose in both the interim reporting period (if applicable) and the annual reporting period of the change the nature of and reason for the change in accounting principle.
This guidance does not currently impact the Company’s consolidation of its subsidiaries but Update 2025-03 will be followed in any future business combination situations.
Business Segments
FASB guidance requires a "management approach" in the presentation of business segments based on how management internally evaluates the operating performance of business units. The discussion of segment operating results that follows is being provided based on segment data prepared in accordance with this methodology.
Our business segments are as follows:
|
● |
Life insurance operations, consisting of the life insurance operations of TLIC, FBLIC and TAI; |
|
● |
Annuity operations, consisting of the annuity operations of TLIC, FBLIC and TAI and |
|
● |
Corporate operations, which includes the results of the parent company and TMC after the elimination of intercompany amounts. |
Please see below and Note 4 to the Consolidated Financial Statements for the three months and six months ended June 30, 2026 and 2025 and as of June 30, 2026 and December 31, 2025 for additional information regarding segment information.
FINANCIAL HIGHLIGHTS
Consolidated Condensed Results of Operations for the Three Months Ended June 30, 2026 and 2025
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Premiums |
$ | 11,744,314 | $ | 10,985,721 | $ | 758,593 | ||||||
|
Net investment income |
8,927,231 | 9,111,238 | (184,007 | ) | ||||||||
|
Net realized investment losses |
(91,816 | ) | (22,958 | ) | (68,858 | ) | ||||||
|
Service fees |
596,927 | 2,304,439 | (1,707,512 | ) | ||||||||
|
Other income |
266,914 | 3,212 | 263,702 | |||||||||
|
Total revenues |
21,443,570 | 22,381,652 | (938,082 | ) | ||||||||
|
Benefits and claims |
14,135,177 | 13,396,845 | 738,332 | |||||||||
|
Expenses |
5,228,152 | 5,658,212 | (430,060 | ) | ||||||||
|
Total benefits, claims and expenses |
19,363,329 | 19,055,057 | 308,272 | |||||||||
|
Income before federal income tax expense |
2,080,241 | 3,326,595 | (1,246,354 | ) | ||||||||
|
Federal income tax expense |
485,580 | 751,862 | (266,282 | ) | ||||||||
|
Net income |
$ | 1,594,661 | $ | 2,574,733 | $ | (980,072 | ) | |||||
|
Net income per common share |
||||||||||||
|
Class A common stock |
$ | 0.1693 | $ | 0.2719 | $ | (0.1026 | ) | |||||
|
Class B common stock |
$ | 0.1439 | $ | 0.2311 | $ | (0.0872 | ) | |||||
Consolidated Condensed Results of Operations for the Six Months Ended June 30, 2026 and 2025
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Premiums |
$ | 22,430,563 | $ | 21,144,797 | $ | 1,285,766 | ||||||
|
Net investment income |
17,785,803 | 16,929,521 | 856,282 | |||||||||
|
Net realized investment gains |
78,297 | 839,246 | (760,949 | ) | ||||||||
|
Service fees |
1,040,400 | 3,056,354 | (2,015,954 | ) | ||||||||
|
Other income |
269,141 | 21,429 | 247,712 | |||||||||
|
Total revenues |
41,604,204 | 41,991,347 | (387,143 | ) | ||||||||
|
Benefits and claims |
26,476,270 | 25,577,713 | 898,557 | |||||||||
|
Expenses |
10,387,514 | 11,345,808 | (958,294 | ) | ||||||||
|
Total benefits, claims and expenses |
36,863,784 | 36,923,521 | (59,737 | ) | ||||||||
|
Income before federal income tax expense |
4,740,420 | 5,067,826 | (327,406 | ) | ||||||||
|
Federal income tax expense |
1,090,004 | 1,124,475 | (34,471 | ) | ||||||||
|
Net income |
$ | 3,650,416 | $ | 3,943,351 | $ | (292,935 | ) | |||||
|
Net income per common share |
||||||||||||
|
Class A common stock |
$ | 0.3875 | $ | 0.4164 | $ | (0.0289 | ) | |||||
|
Class B common stock |
$ | 0.3294 | $ | 0.3539 | $ | (0.0245 | ) | |||||
Consolidated Condensed Financial Position as of June 30, 2026 and December 31, 2025
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 to 2025 |
||||||||||
|
Investment assets |
$ | 554,508,751 | $ | 525,598,084 | $ | 28,910,667 | ||||||
|
Assets held in trust under coinsurance agreement |
14,702,075 | 21,066,069 | (6,363,994 | ) | ||||||||
|
Other assets |
145,876,275 | 142,520,126 | 3,356,149 | |||||||||
|
Total assets |
$ | 715,087,101 | $ | 689,184,279 | $ | 25,902,822 | ||||||
|
Policy liabilities |
$ | 595,937,199 | $ | 569,737,114 | $ | 26,200,085 | ||||||
|
Funds withheld under coinsurance agreement |
14,187,769 | 20,001,969 | (5,814,200 | ) | ||||||||
|
Deferred federal income taxes |
6,855,370 | 6,584,494 | 270,876 | |||||||||
|
Other liabilities |
8,866,954 | 6,288,104 | 2,578,850 | |||||||||
|
Total liabilities |
625,847,292 | 602,611,681 | 23,235,611 | |||||||||
|
Shareholders' equity |
89,239,809 | 86,572,598 | 2,667,211 | |||||||||
|
Total liabilities and shareholders' equity |
$ | 715,087,101 | $ | 689,184,279 | $ | 25,902,822 | ||||||
|
Shareholders' equity per common share |
||||||||||||
|
Class A common stock |
$ | 9.4741 | $ | 9.1909 | $ | 0.2832 | ||||||
|
Class B common stock |
$ | 8.0530 | $ | 7.8123 | $ | 0.2407 | ||||||
Results of Operations – Three Months Ended June 30, 2026 and 2025
Revenues
Our primary sources of revenue are life insurance premium income and investment income. Premium payments are classified as first-year, renewal and single. In addition, realized gains and losses on investment holdings can significantly impact revenues from period to period.
Our revenues for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Premiums |
$ | 11,744,314 | $ | 10,985,721 | $ | 758,593 | ||||||
|
Net investment income |
8,927,231 | 9,111,238 | (184,007 | ) | ||||||||
|
Net realized investment losses |
(91,816 | ) | (22,958 | ) | (68,858 | ) | ||||||
|
Service fees |
596,927 | 2,304,439 | (1,707,512 | ) | ||||||||
|
Other income |
266,914 | 3,212 | 263,702 | |||||||||
|
Total revenues |
$ | 21,443,570 | $ | 22,381,652 | $ | (938,082 | ) | |||||
The $938,082 decrease in total revenues for the three months ended June 30, 2026, is discussed below.
Premiums
Our premiums for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Ordinary life first year |
$ | 980,656 | $ | 879,303 | $ | 101,353 | ||||||
|
Ordinary life renewal |
3,439,422 | 2,768,494 | 670,928 | |||||||||
|
Supplementary contracts |
- | 17,576 | (17,576 | ) | ||||||||
|
Final expense first year |
800,543 | 761,888 | 38,655 | |||||||||
|
Final expense renewal |
6,523,693 | 6,558,460 | (34,767 | ) | ||||||||
|
Total premiums |
$ | 11,744,314 | $ | 10,985,721 | $ | 758,593 | ||||||
The $758,593 increase in premiums for the three months ended June 30, 2026 is primarily due to a $670,928 increase in ordinary life renewal premiums and a $101,353 increase in ordinary life first year premiums.
The increase in ordinary life renewal and first year premiums reflects ordinary dollar denominated life insurance policies sold in the international market by TAI.
Net Investment Income
The major components of our net investment income for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Fixed maturity securities |
$ | 2,734,698 | $ | 2,530,774 | $ | 203,924 | ||||||
|
Equity securities |
114,810 | 86,081 | 28,729 | |||||||||
|
Other long-term investments |
929,687 | 1,069,651 | (139,964 | ) | ||||||||
|
Mortgage loans |
5,383,012 | 5,612,876 | (229,864 | ) | ||||||||
|
Policy loans |
108,801 | 88,103 | 20,698 | |||||||||
|
Short-term and other investments |
298,478 | 410,977 | (112,499 | ) | ||||||||
|
Gross investment income |
9,569,486 | 9,798,462 | (228,976 | ) | ||||||||
|
Investment expenses |
(642,255 | ) | (687,224 | ) | (44,969 | ) | ||||||
|
Net investment income |
$ | 8,927,231 | $ | 9,111,238 | $ | (184,007 | ) | |||||
The $228,976 decrease in gross investment income for the three months ended June 30, 2026 is primarily due to $229,864 decrease in mortgage loans, $139,964 decrease in other long-term investments and a $112,499 decrease in short term and other investments that exceeded a $203,924 increase in fixed maturity securities.
The decrease in mortgage loans of $229,864 is due to the acceleration of premium amortization from early payoffs of mortgage loans and a reduction in the gross mortgage loans interest rate. The decrease in other long-term investments is due to decreased other long-term investments of $5.9 million since June 30, 2025. The decline in short-term and other investments is primarily due to a decline in the annual percentage yield earned on invested cash and cash equivalent balances. The increase in fixed maturity securities is primarily due to increased fixed maturity investments of $21.2 million since June 30, 2025.
The $44,969 decrease in investment expense for the three months ended June 30, 2026 is primarily due to decrease mortgage loan costs.
Net Realized Investment Losses
Our net realized investment losses result from sales of fixed maturity securities available-for-sale, mortgage loans on real estate, equity securities, changes in fair value of equity securities and changes in current estimate of credit losses.
Our net realized investment losses for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Fixed maturity securities available-for-sale: |
||||||||||||
|
Sale proceeds |
$ | 3,909,828 | $ | 23,889,372 | $ | (19,979,544 | ) | |||||
|
Amortized cost at sale date |
3,867,993 | 23,962,663 | (20,094,670 | ) | ||||||||
|
Net realized gains (losses) |
$ | 41,835 | $ | (73,291 | ) | $ | 115,126 | |||||
|
Mortgage loans on real estate |
||||||||||||
|
Payment and sale proceeds on mortgage loans |
$ | 19,688,748 | $ | 38,122,063 | $ | (18,433,315 | ) | |||||
|
Principal collections |
19,688,748 | 38,123,200 | (18,434,452 | ) | ||||||||
|
Net realized losses |
$ | - | $ | (1,137 | ) | $ | 1,137 | |||||
|
Equity securities |
||||||||||||
|
Sales proceeds |
$ | - | $ | 4,222 | $ | (4,222 | ) | |||||
|
Cost at sale date |
- | - | - | |||||||||
|
Net realized gains |
$ | - | $ | 4,222 | $ | (4,222 | ) | |||||
|
Equity securities, changes in fair value |
$ | (106,350 | ) | $ | 60,304 | $ | (166,654 | ) | ||||
|
Changes in current estimate of credit losses |
$ | (27,301 | ) | $ | (13,056 | ) | $ | (14,245 | ) | |||
|
Net realized investment losses |
$ | (91,816 | ) | $ | (22,958 | ) | $ | (68,858 | ) | |||
Service Fees
The $1,707,512 decrease in service fees for the three months ended June 30, 2026 is primarily due to a decrease in fees from Trinity Mortgage Corporation brokering mortgage loans for a fee to third parties.
Other Income
The $263,702 increase in other income is primarily due to interest of $189,061 from the Internal Revenue Service on a federal income tax refund of $1,817,859 for the tax year 2023.
Total Benefits, Claims and Expenses
Our benefits, claims and expenses are primarily generated from benefit payments, surrenders, interest credited to policyholders, change in reserves, commissions and other underwriting, insurance and acquisition expenses. Benefit payments can significantly impact expenses from period to period.
Our benefits, claims and expenses for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Benefits and claims |
||||||||||||
|
Increase in future policy benefits |
$ | 4,054,616 | $ | 3,847,949 | $ | 206,667 | ||||||
|
Death benefits |
4,095,473 | 3,878,238 | 217,235 | |||||||||
|
Surrenders |
882,726 | 750,541 | 132,185 | |||||||||
|
Interest credited to policyholders |
4,969,653 | 4,818,377 | 151,276 | |||||||||
|
Dividend, endowment and supplementary life contract benefits |
132,709 | 101,740 | 30,969 | |||||||||
|
Total benefits and claims |
14,135,177 | 13,396,845 | 738,332 | |||||||||
|
Expenses |
||||||||||||
|
Policy acquisition costs deferred |
(3,845,755 | ) | (3,233,202 | ) | (612,553 | ) | ||||||
|
Amortization of deferred policy acquisition costs |
2,028,145 | 2,415,015 | (386,870 | ) | ||||||||
|
Amortization of value of insurance business acquired |
88,192 | 93,036 | (4,844 | ) | ||||||||
|
Commissions |
3,833,424 | 3,177,497 | 655,927 | |||||||||
|
Other underwriting, insurance and acquisition expenses |
3,124,146 | 3,205,866 | (81,720 | ) | ||||||||
|
Total expenses |
5,228,152 | 5,658,212 | (430,060 | ) | ||||||||
|
Total benefits, claims and expenses |
$ | 19,363,329 | $ | 19,055,057 | $ | 308,272 | ||||||
The $308,272 increase in total benefits, claims and expenses for the three months ended June 30, 2026, is discussed below.
Benefits and Claims
The $738,332 increase in benefits and claims for the three months ended June 30, 2026 is primarily due to the following:
|
● |
$217,235 increase in death benefits is primarily due to approximately $711,752 of increased final expense benefits that exceeded $494,517 of decreased ordinary life benefits. |
|
● |
$206,667 increase in future policy benefits is primarily due to an increase in the average value of the life policies in force and the aging of existing life policies. |
|
● |
$151,276 increase in interest credited to policyholders is primarily due to an increased policyholders’ account balances of $6.0 million since June 30, 2025. |
|
● |
$132,185 increase in surrenders is based upon policyholder election. |
Deferral and Amortization of Deferred Acquisition Costs
Commissions and other acquisition costs which vary with and are primarily related to the successful production of new and renewal insurance contracts are deferred and amortized on a constant level basis over the expected life of the related insurance contracts. With the adoption of ASU 2018-12, impairment testing is no longer applicable to deferred policy acquisition costs. The Company, however, reviews and updates actuarial experience assumptions (such as mortality, surrenders, lapse, and premium persistency) serving as inputs to the models that establish the expected life for deferred policy acquisition costs and other actuarial balances during the third quarter of each year, or more frequently if evidence suggests assumptions should be revised. The Company makes model refinements as necessary, and any changes resulting from these assumption updates are applied prospectively.
Deferred policy acquisition costs are amortized by issue year month and product cohorts (defined as the unit for asset amortization measurement) with the amortization based upon projected policy counts. In addition, since the amortization of deferred policy acquisition costs is no longer impacted by investment gains and losses, the unrealized gain (loss) adjustment is also no longer applicable to accumulated other comprehensive income (loss).
For the three months ended June 30, 2026 and 2025, capitalized costs were $3,845,755 and $3,233,202, respectively. Amortization of deferred policy acquisition costs for the three months ended June 30, 2026 and 2025 were $2,028,145 and $2,415,015, respectively.
The $612,553 increase in the 2026 acquisition costs deferred primarily relates to increased annuity and ordinary life first year production with a corresponding increase in deferral of eligible annuity and ordinary life first year commissions. There was a $386,870 decrease in the 2026 amortization of deferred acquisition costs primarily due to the adoption of ASU 2018-12.
Amortization of Value of Insurance Business Acquired
The cost of acquiring insurance business is amortized over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. Amortization of the value of insurance business acquired was $88,192 and $93,036 for the three months ended June 30, 2026 and 2025, respectively, representing a $4,844 decrease.
Commissions
Our commissions for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Annuity |
$ | 798,341 | $ | 399,251 | $ | 399,090 | ||||||
|
Ordinary life first year |
1,079,064 | 954,535 | 124,529 | |||||||||
|
Ordinary life renewal |
438,867 | 330,599 | 108,268 | |||||||||
|
Final expense first year |
942,948 | 899,016 | 43,932 | |||||||||
|
Final expense renewal |
574,204 | 594,096 | (19,892 | ) | ||||||||
|
Total commissions |
$ | 3,833,424 | $ | 3,177,497 | $ | 655,927 | ||||||
The $655,927 increase in commissions for the three months ended June 30, 2026 is primarily due to a $399,090 increase in annuity commissions (corresponding to $12,707,997 increased annuity considerations), $124,529 increase in ordinary life first year commissions (corresponding to $101,353 increased ordinary life first year premiums) and a $108,268 increase in ordinary life renewal commissions (corresponding to $670,928 increased ordinary life renewal premiums).
Other Underwriting, Insurance and Acquisition Expenses
The $81,720 decrease in other underwriting, insurance and acquisition expenses for the three months ended June 30, 2026 was primarily related to a decrease in legal fees.
Federal Income Taxes
FTFC filed its 2024 consolidated federal income tax return with TLIC, FBLIC and TMC. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.
For the three months ended June 30, 2026 and 2025, current income tax expense was $248,963 and $799,314, respectively. For the three months ended June 30, 2026 and 2025, deferred federal income tax expense (benefit) was $236,617 and ($47,452), respectively.
Net Income Per Common Share Basic
For the three months ended June 30, 2026, the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,419,341) of Class A shares (9,333,404) and Class B shares (85,937) as of the reporting date. For the three months ended June 30, 2025 the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,470,277) of Class A shares (9,384,340) and Class B shares (85,937) as of the reporting date.
For the three months ended June 30, 2026, the net income allocated to the Class A shareholders of $1,580,112 is the total net income $1,594,661 less the net income allocated to the Class B shareholders $14,549. For the three months ended June 30, 2025, the net income allocated to the Class A shareholders of $2,551,369 is the total net income $2,574,733 less the net income allocated to the Class B shareholders $23,364.
The weighted average outstanding common shares basic for the three months ended June 30, 2026 and 2025 were 9,333,404 and 9,384,340 for Class A shares and 101,102 for Class B shares.
Business Segments
The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment.
The revenues and income before federal income taxes from our business segments for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Three Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Revenues: |
||||||||||||
|
Life insurance operations |
$ | 14,083,296 | $ | 13,374,112 | $ | 709,184 | ||||||
|
Annuity operations |
6,489,765 | 6,825,022 | (335,257 | ) | ||||||||
|
Corporate operations |
870,509 | 2,182,518 | (1,312,009 | ) | ||||||||
|
Total |
$ | 21,443,570 | $ | 22,381,652 | $ | (938,082 | ) | |||||
|
Income (loss) before federal income taxes: |
||||||||||||
|
Life insurance operations |
$ | 2,098,792 | $ | 1,833,786 | $ | 265,006 | ||||||
|
Annuity operations |
(309,523 | ) | 175,828 | (485,351 | ) | |||||||
|
Corporate operations |
290,972 | 1,316,981 | (1,026,009 | ) | ||||||||
|
Total |
$ | 2,080,241 | $ | 3,326,595 | $ | (1,246,354 | ) | |||||
The increases and decreases of revenues and profitability from our business segments for the three months ended June 30, 2026 and 2025 are summarized as follows:
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | 758,593 | $ | - | $ | - | $ | 758,593 | ||||||||
|
Net investment income |
(23,602 | ) | (235,163 | ) | 74,758 | (184,007 | ) | |||||||||
|
Net realized investment gains |
(23,007 | ) | (45,851 | ) | - | (68,858 | ) | |||||||||
|
Service fees and other income |
(2,800 | ) | (54,243 | ) | (1,386,767 | ) | (1,443,810 | ) | ||||||||
|
Total revenue |
709,184 | (335,257 | ) | (1,312,009 | ) | (938,082 | ) | |||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
206,667 | - | - | 206,667 | ||||||||||||
|
Death benefits |
217,235 | - | - | 217,235 | ||||||||||||
|
Surrenders |
132,185 | - | - | 132,185 | ||||||||||||
|
Interest credited to policyholders |
- | 151,276 | - | 151,276 | ||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
30,969 | - | - | 30,969 | ||||||||||||
|
Total benefits and claims |
587,056 | 151,276 | - | 738,332 | ||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
(575,609 | ) | (423,814 | ) | - | (999,423 | ) | |||||||||
|
Amortization of value of insurance business acquired |
(2,422 | ) | (2,422 | ) | - | (4,844 | ) | |||||||||
|
Commissions |
256,837 | 399,090 | - | 655,927 | ||||||||||||
|
Other underwriting, insurance and acquisition expenses |
178,316 | 25,964 | (286,000 | ) | (81,720 | ) | ||||||||||
|
Total expenses |
(142,878 | ) | (1,182 | ) | (286,000 | ) | (430,060 | ) | ||||||||
|
Total benefits, claims and expenses |
444,178 | 150,094 | (286,000 | ) | 308,272 | |||||||||||
|
Income (loss) before federal income taxes |
$ | 265,006 | $ | (485,351 | ) | $ | (1,026,009 | ) | $ | (1,246,354 | ) | |||||
Results of Operations – Six Months Ended June 30, 2026 and 2025
Revenues
Our primary sources of revenue are life insurance premium income and investment income. Premium payments are classified as first-year, renewal and single. In addition, realized gains and losses on investment holdings can significantly impact revenues from period to period.
Our revenues for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Premiums |
$ | 22,430,563 | $ | 21,144,797 | $ | 1,285,766 | ||||||
|
Net investment income |
17,785,803 | 16,929,521 | 856,282 | |||||||||
|
Net realized investment gains |
78,297 | 839,246 | (760,949 | ) | ||||||||
|
Service fees |
1,040,400 | 3,056,354 | (2,015,954 | ) | ||||||||
|
Other income |
269,141 | 21,429 | 247,712 | |||||||||
|
Total revenues |
$ | 41,604,204 | $ | 41,991,347 | $ | (387,143 | ) | |||||
The $387,143 decrease in total revenues for the six months ended June 30, 2026 is discussed below.
Premiums
Our premiums for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Ordinary life first year |
$ | 1,754,792 | $ | 1,594,519 | $ | 160,273 | ||||||
|
Ordinary life renewal |
6,155,912 | 4,990,325 | 1,165,587 | |||||||||
|
Supplementary contracts |
- | 17,576 | (17,576 | ) | ||||||||
|
Final expense first year |
1,536,658 | 1,525,646 | 11,012 | |||||||||
|
Final expense renewal |
12,983,201 | 13,016,731 | (33,530 | ) | ||||||||
|
Total premiums |
$ | 22,430,563 | $ | 21,144,797 | $ | 1,285,766 | ||||||
The $1,285,766 increase in premiums for the six months ended June 30, 2026 is primarily due to a $1,165,587 increase in ordinary life renewal premiums and a $160,273 increase in ordinary life first year premiums.
The increase in ordinary life renewal and first year premiums reflects ordinary dollar denominated life insurance policies sold in the international market by TAI.
Net Investment Income
The major components of our net investment income for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Fixed maturity securities |
$ | 5,316,105 | $ | 4,670,728 | $ | 645,377 | ||||||
|
Equity securities |
216,784 | 163,027 | 53,757 | |||||||||
|
Other long-term investments |
1,906,527 | 2,191,549 | (285,022 | ) | ||||||||
|
Mortgage loans |
10,784,741 | 10,456,826 | 327,915 | |||||||||
|
Policy loans |
209,226 | 171,410 | 37,816 | |||||||||
|
Short-term and other investments |
567,123 | 741,125 | (174,002 | ) | ||||||||
|
Gross investment income |
19,000,506 | 18,394,665 | 605,841 | |||||||||
|
Investment expenses |
(1,214,703 | ) | (1,465,144 | ) | (250,441 | ) | ||||||
|
Net investment income |
$ | 17,785,803 | $ | 16,929,521 | $ | 856,282 | ||||||
The $605,841 increase in gross investment income for the six months ended June 30, 2026 is primarily due to $645,377 increase in fixed maturity securities and $327,915 increase in mortgage loans that exceeded a $285,022 decrease in other long-term investments and $174,002 decrease in short-term and other investments.
The increase in fixed maturity securities is primarily due to increased fixed maturity investments of $21.2 million since June 30, 2025. The increase in mortgage loans is primarily due to increased mortgage loans investments of $7.9 million since June 30, 2025. The decrease in other long-term investments is due to decreased other long-term investments of $5.9 million since June 30, 2025. The decline in short-term and other investments is primarily due to a decline in the annual percentage yield earned on invested cash and cash equivalent balances.
The $250,441 decrease in investment expense for the six months ended June 30, 2026, is primarily due to decreased mortgage loan costs.
Net Realized Investment Gains
Our net realized investment gains result from sales of fixed maturity securities available-for-sale, mortgage loans on real estate, investment real estate, equity securities, changes in fair value of equity securities and changes in current estimate of credit losses.
Our net realized investment gains for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Fixed maturity securities available-for-sale: |
||||||||||||
|
Sale proceeds |
$ | 12,401,062 | $ | 55,696,776 | $ | (43,295,714 | ) | |||||
|
Amortized cost at sale date |
12,353,705 | 55,543,987 | (43,190,282 | ) | ||||||||
|
Net realized gains |
$ | 47,357 | $ | 152,789 | $ | (105,432 | ) | |||||
|
Mortgage loans on real estate |
||||||||||||
|
Payment and sale proceeds on mortgage loans |
$ | 38,148,884 | $ | 58,809,803 | $ | (20,660,919 | ) | |||||
|
Principal collections |
38,148,884 | 58,810,940 | (20,662,056 | ) | ||||||||
|
Net realized losses |
$ | - | $ | (1,137 | ) | $ | 1,137 | |||||
|
Investment real estate |
||||||||||||
|
Sales proceeds |
$ | 184,832 | $ | 294,982 | $ | (110,150 | ) | |||||
|
Carrying value at sale date |
150,370 | 265,570 | (115,200 | ) | ||||||||
|
Net realized gains |
$ | 34,462 | $ | 29,412 | $ | 5,050 | ||||||
|
Equity securities |
||||||||||||
|
Sales proceeds |
$ | - | $ | 6,944 | $ | (6,944 | ) | |||||
|
Cost at sale date |
- | - | - | |||||||||
|
Net realized gains |
$ | - | $ | 6,944 | $ | (6,944 | ) | |||||
|
Equity securities, changes in fair value |
$ | 63,663 | $ | 33,128 | $ | 30,535 | ||||||
|
Changes in current estimate of credit losses |
$ | (67,185 | ) | $ | 618,110 | $ | (685,295 | ) | ||||
|
Net realized investment gains |
$ | 78,297 | $ | 839,246 | $ | (760,949 | ) | |||||
Service Fees
The $2,015,954 decrease in service fees for the six months ended June 30, 2026 is primarily due to a decrease in fees from Trinity Mortgage Corporation brokering mortgage loans for a fee to third parties.
Other Income
The $247,712 increase in other income is primarily due to interest of $189,061 from the Internal Revenue Service on a federal income tax refund of $1,817,859 for the tax year 2023.
Total Benefits, Claims and Expenses
Our benefits, claims and expenses are primarily generated from benefit payments, surrenders, interest credited to policyholders, change in reserves, commissions and other underwriting, insurance and acquisition expenses. Benefit payments can significantly impact expenses from period to period.
Our benefits, claims and expenses for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Benefits and claims |
||||||||||||
|
Increase in future policy benefits |
$ | 6,712,327 | $ | 6,387,866 | $ | 324,461 | ||||||
|
Death benefits |
8,225,475 | 7,843,231 | 382,244 | |||||||||
|
Surrenders |
1,580,492 | 1,526,108 | 54,384 | |||||||||
|
Interest credited to policyholders |
9,725,657 | 9,589,981 | 135,676 | |||||||||
|
Dividend, endowment and supplementary life contract benefits |
232,319 | 230,527 | 1,792 | |||||||||
|
Total benefits and claims |
26,476,270 | 25,577,713 | 898,557 | |||||||||
|
Expenses |
||||||||||||
|
Policy acquisition costs deferred |
(7,025,076 | ) | (6,106,464 | ) | (918,612 | ) | ||||||
|
Amortization of deferred policy acquisition costs |
3,824,306 | 4,740,915 | (916,609 | ) | ||||||||
|
Amortization of value of insurance business acquired |
176,383 | 186,072 | (9,689 | ) | ||||||||
|
Commissions |
6,956,759 | 5,877,340 | 1,079,419 | |||||||||
|
Other underwriting, insurance and acquisition expenses |
6,455,142 | 6,647,945 | (192,803 | ) | ||||||||
|
Total expenses |
10,387,514 | 11,345,808 | (958,294 | ) | ||||||||
|
Total benefits, claims and expenses |
$ | 36,863,784 | $ | 36,923,521 | $ | (59,737 | ) | |||||
The $59,737 decrease in total benefits, claims and expenses for the six months ended June 30, 2026, is discussed below.
Benefits and Claims
The $898,557 increase in benefits and claims for the six months ended June 30, 2026, is primarily due to the following:
|
● |
$382,244 increase in death benefits is primarily due to approximately $768,228 of increased final expense benefits that exceeded $385,984 of decreased ordinary life benefits. |
|
● |
$324,461 increase in future policy benefits is primarily due to the increased number of life policies in force and the aging of existing life policies. |
|
● |
$135,676 increase in interest credited is primarily due to an increased policyholders’ account balances of $6.0 million since June 30, 2025. |
Deferral and Amortization of Deferred Acquisition Costs
Commissions and other acquisition costs which vary with and are primarily related to the successful production of new and renewal insurance contracts are deferred and amortized on a constant level basis over the expected life of the related insurance contracts. With the adoption of ASU 2018-12, impairment testing is no longer applicable to deferred policy acquisition costs. The Company, however, reviews and updates actuarial experience assumptions (such as mortality, surrenders, lapse, and premium persistency) serving as inputs to the models that establish the expected life for deferred policy acquisition costs and other actuarial balances during the third quarter of each year, or more frequently if evidence suggests assumptions should be revised. The Company makes model refinements as necessary, and any changes resulting from these assumption updates are applied prospectively.
Deferred policy acquisition costs are amortized by issue year month and product cohorts (defined as the unit for asset amortization measurement) with the amortization based upon projected policy counts. In addition, since the amortization of deferred policy acquisition costs is no longer impacted by investment gains and losses, the unrealized gain (loss) adjustment is also no longer applicable to accumulated other comprehensive income (loss).
For the six months ended June 30, 2026 and 2025, capitalized costs were $7,025,076 and $6,106,464, respectively. Amortization of deferred policy acquisition costs for the six months ended June 30, 2026 and 2025 were $3,824,306 and $4,740,915, respectively.
There was a $918,612 increase the 2026 acquisition costs deferred primarily relates to increased annuity and ordinary life first year production with a corresponding increase in deferral of eligible annuity and ordinary life first year commissions. There was a $916,609 decrease in the 2026 amortization of deferred acquisition costs due to adoption of ASU 2018-12.
Amortization of Value of Insurance Business Acquired
The cost of acquiring insurance business is amortized over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. Amortization of the value of insurance business acquired was $176,383 and $186,072 for the six months ended June 30, 2026 and 2025, respectively, representing a $9,689 decrease.
Commissions
Our commissions for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Annuity |
$ | 1,315,954 | $ | 581,743 | $ | 734,211 | ||||||
|
Ordinary life first year |
1,906,302 | 1,707,156 | 199,146 | |||||||||
|
Ordinary life renewal |
774,150 | 604,770 | 169,380 | |||||||||
|
Final expense first year |
1,814,032 | 1,801,843 | 12,189 | |||||||||
|
Final expense renewal |
1,146,321 | 1,181,828 | (35,507 | ) | ||||||||
|
Total commissions |
$ | 6,956,759 | $ | 5,877,340 | $ | 1,079,419 | ||||||
The $1,079,419 increase in commissions for the six months ended June 30, 2026 is primarily due a $734,211 increase in annuity commissions (corresponding to $21,951,565 increased annuity considerations), $199,146 increase in ordinary life first year commissions (corresponding to $160,273 increased ordinary life first year premiums) and a $169,380 increase in ordinary life renewal commissions (corresponding to $1,165,587 increased ordinary life renewal premiums).
Underwriting, Insurance and Acquisition Expenses
The $192,803 decrease in other underwriting, insurance and acquisition expenses for the six months ended June 30, 2026 was primarily related to a decrease in legal fees.
Federal Income Taxes
FTFC filed its 2024 consolidated federal income tax return with TLIC, FBLIC and TMC. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.
For the six months ended June 30, 2026 and June 30, 2025, current income tax expense was $557,769 and $1,014,899. Deferred federal income tax expense was $532,235 and $109,576 for the six months ended June 30, 2026 and 2025, respectively.
Net Income Per Common Share Basic
For the six months ended June 30, 2026, the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,419,341) of Class A shares (9,333,404) and Class B shares (85,937) as of the reporting date. For the six months ended June 30, 2025 the net income allocated to the Class B shareholders is the total net income multiplied by the right to receive dividends at 85% for Class B shares (85,937) as of the reporting date divided by the allocated total shares (9,470,277) of Class A shares (9,384,340) and Class B shares (85,937) as of the reporting date.
For the six months ended June 30, 2026, the net income allocated to the Class A shareholders of $3,617,112 is the total net income $3,650,416 less the net income allocated to the Class B shareholders $33,304. For the six months ended June 30, 2025, the net income allocated to the Class A shareholders of $3,907,567 is the total net income $3,943,351 less the net income allocated to the Class B shareholders $35,784.
The weighted average outstanding common shares basic for the six months ended June 30, 2026 and 2025 were 9,333,404 and 9,384,340 for Class A shares and 101,102 for Class B shares.
Business Segments
The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment.
The revenues and income before federal income taxes from our business segments for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Revenues: |
||||||||||||
|
Life insurance operations |
$ | 27,104,612 | $ | 25,640,280 | $ | 1,464,332 | ||||||
|
Annuity operations |
12,941,197 | 13,091,553 | (150,356 | ) | ||||||||
|
Corporate operations |
1,558,395 | 3,259,514 | (1,701,119 | ) | ||||||||
|
Total |
$ | 41,604,204 | $ | 41,991,347 | $ | (387,143 | ) | |||||
|
Income (loss) before income taxes: |
||||||||||||
|
Life insurance operations |
$ | 5,116,884 | $ | 3,668,474 | $ | 1,448,410 | ||||||
|
Annuity operations |
(459,133 | ) | (425,920 | ) | (33,213 | ) | ||||||
|
Corporate operations |
82,669 | 1,825,272 | (1,742,603 | ) | ||||||||
|
Total |
$ | 4,740,420 | $ | 5,067,826 | $ | (327,406 | ) | |||||
The increases and decreases of revenues and profitability from our business segments for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
Life Insurance |
Annuity |
Corporate |
||||||||||||||
|
Operations |
Operations |
Operations |
Total |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Premiums |
$ | 1,285,766 | $ | - | $ | - | $ | 1,285,766 | ||||||||
|
Net investment income |
364,598 | 449,704 | 41,980 | 856,282 | ||||||||||||
|
Net realized investment gains |
(191,422 | ) | (569,527 | ) | - | (760,949 | ) | |||||||||
|
Service fees and other income |
5,390 | (30,533 | ) | (1,743,099 | ) | (1,768,242 | ) | |||||||||
|
Total revenue |
1,464,332 | (150,356 | ) | (1,701,119 | ) | (387,143 | ) | |||||||||
|
Benefits and claims |
||||||||||||||||
|
Increase in future policy benefits |
324,461 | - | - | 324,461 | ||||||||||||
|
Death benefits |
382,244 | - | - | 382,244 | ||||||||||||
|
Surrenders |
54,384 | - | - | 54,384 | ||||||||||||
|
Interest credited to policyholders |
- | 135,676 | - | 135,676 | ||||||||||||
|
Dividend, endowment and supplementary life contract benefits |
1,792 | - | - | 1,792 | ||||||||||||
|
Total benefits and claims |
762,881 | 135,676 | - | 898,557 | ||||||||||||
|
Expenses |
||||||||||||||||
|
Policy acquisition costs deferred net of amortization |
(1,034,448 | ) | (800,773 | ) | - | (1,835,221 | ) | |||||||||
|
Amortization of value of insurance business acquired |
(4,844 | ) | (4,845 | ) | - | (9,689 | ) | |||||||||
|
Commissions |
345,208 | 734,211 | - | 1,079,419 | ||||||||||||
|
Other underwriting, insurance and acquisition expenses |
(52,875 | ) | (181,412 | ) | 41,484 | (192,803 | ) | |||||||||
|
Total expenses |
(746,959 | ) | (252,819 | ) | 41,484 | (958,294 | ) | |||||||||
|
Total benefits, claims and expenses |
15,922 | (117,143 | ) | 41,484 | (59,737 | ) | ||||||||||
|
Income (loss) before federal income taxes (benefits) |
$ | 1,448,410 | $ | (33,213 | ) | $ | (1,742,603 | ) | $ | (327,406 | ) | |||||
Consolidated Financial Condition
Our invested assets as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Assets |
||||||||||||
|
Investments |
||||||||||||
|
Available-for-sale fixed maturity securities at fair value |
||||||||||||
|
(amortized cost: $242,863,773 and $215,989,423 as of June 30, 2026 and December 31, 2025, respectively) |
$ | 234,213,342 | $ | 209,926,505 | $ | 24,286,837 | ||||||
|
Equity securities at fair value |
||||||||||||
|
(cost: $5,816,243 and $5,677,164 as of June 30, 2026 and December 31, 2025, respectively) |
6,040,317 | 5,837,575 | 202,742 | |||||||||
|
Mortgage loans on real estate |
257,171,436 | 250,899,714 | 6,271,722 | |||||||||
|
Investment real estate |
2,683,607 | 2,526,085 | 157,522 | |||||||||
|
Policy loans |
5,722,616 | 5,132,086 | 590,530 | |||||||||
|
Other long-term investments |
48,677,433 | 51,276,119 | (2,598,686 | ) | ||||||||
|
Total investments |
$ | 554,508,751 | $ | 525,598,084 | $ | 28,910,667 | ||||||
The increase and decrease in fixed maturity available-for-sale securities for the six months ended June 30, 2026 and 2025, respectively, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Fixed maturity securities, available-for-sale, beginning |
$ | 209,926,505 | $ | 213,745,821 | ||||
|
Purchases |
39,260,942 | 50,575,278 | ||||||
|
Prepayment premium adjustment |
- | 3,120 | ||||||
|
Unrealized appreciation (depreciation) |
(2,587,513 | ) | 4,479,851 | |||||
|
Net realized investment gains (losses), including credit losses |
(19,828 | ) | 770,899 | |||||
|
Transfer to other long-term investments |
- | (156,068 | ) | |||||
|
Sales proceeds |
(9,026,062 | ) | (55,449,896 | ) | ||||
|
Maturities |
(3,375,000 | ) | (250,000 | ) | ||||
|
Accretion of discount (premium amortization) |
34,298 | (669,473 | ) | |||||
|
Increase (decrease) |
24,286,837 | (696,289 | ) | |||||
|
Fixed maturity securities, available-for-sale, ending |
$ | 234,213,342 | $ | 213,049,532 | ||||
Fixed maturity securities available-for-sale are reported at fair value with unrealized gains and losses, net of applicable income taxes, reflected as a separate component in shareholders' equity within “Accumulated Other Comprehensive Income.” The available-for-sale fixed maturity securities portfolio is invested primarily in a variety of U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.
The increase in equity securities for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Equity securities, beginning |
$ | 5,837,575 | $ | 5,336,062 | ||||
|
Purchases |
212,556 | 215,855 | ||||||
|
Realized capital gains |
- | 6,944 | ||||||
|
Proceeds from realized capital gains |
- | (6,944 | ) | |||||
|
Joint venture distributions |
(73,477 | ) | (67,674 | ) | ||||
|
Net realized investment gains, changes in fair value |
63,663 | 33,128 | ||||||
|
Increase |
202,742 | 181,309 | ||||||
|
Equity securities, ending |
$ | 6,040,317 | $ | 5,517,371 | ||||
Equity securities are reported at fair value with the change in fair value reflected in “Net realized investment gains (losses)” within the consolidated statements of operations.
The increase in mortgage loans on real estate for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Mortgage loans on real estate, beginning |
$ | 250,899,714 | $ | 209,364,504 | ||||
|
Purchases |
45,003,735 | 99,467,865 | ||||||
|
Premium amortization |
(242,076 | ) | (65,663 | ) | ||||
|
Net realized investment gains (losses) |
- | (1,137 | ) | |||||
|
Payments |
(38,148,884 | ) | (58,809,803 | ) | ||||
|
Foreclosed - transferred to real estate |
(307,892 | ) | (459,180 | ) | ||||
|
Increase in allowance for bad debts |
(33,161 | ) | (204,909 | ) | ||||
|
Increase |
6,271,722 | 39,927,173 | ||||||
|
Mortgage loans on real estate, ending |
$ | 257,171,436 | $ | 249,291,677 | ||||
The increase in investment real estate for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Investment real estate, beginning |
$ | 2,526,085 | $ | 2,351,549 | ||||
|
Real estate acquired through mortgage loan foreclosures |
307,892 | 459,180 | ||||||
|
Net realized investment gains |
34,462 | 29,412 | ||||||
|
Sales proceeds |
(184,832 | ) | (294,982 | ) | ||||
|
Increase |
157,522 | 193,610 | ||||||
|
Investment real estate, ending |
$ | 2,683,607 | $ | 2,545,159 | ||||
The decrease in other long-term investments (composed mainly of lottery receivables) for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Other long-term investments, beginning |
$ | 51,276,119 | $ | 58,223,514 | ||||
|
Purchases |
2,278,034 | 1,823,500 | ||||||
|
Accretion of discount |
1,866,311 | 2,135,136 | ||||||
|
Transfer from fixed maturity securities, available-for-sale |
- | 156,068 | ||||||
|
Unrealized appreciation (depreciation) |
1,069 | (52,192 | ) | |||||
|
Payments |
(6,744,100 | ) | (7,702,946 | ) | ||||
|
Decrease |
(2,598,686 | ) | (3,640,434 | ) | ||||
|
Other long-term investments, ending |
$ | 48,677,433 | $ | 54,583,080 | ||||
Our assets other than invested assets as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Cash and cash equivalents |
$ | 39,984,625 | $ | 39,496,427 | $ | 488,198 | ||||||
|
Accrued investment income |
6,677,426 | 6,454,380 | 223,046 | |||||||||
|
Recoverable from reinsurers |
9,343,326 | 9,547,506 | (204,180 | ) | ||||||||
|
Assets held in trust under coinsurance agreement |
14,702,075 | 21,066,069 | (6,363,994 | ) | ||||||||
|
Agents' balances and due premiums |
1,735,032 | 1,391,105 | 343,927 | |||||||||
|
Deferred policy acquisition costs |
73,637,787 | 70,437,017 | 3,200,770 | |||||||||
|
Value of insurance business acquired |
2,828,623 | 3,005,006 | (176,383 | ) | ||||||||
|
Other assets |
11,669,456 | 12,188,685 | (519,229 | ) | ||||||||
|
Assets other than investment assets |
$ | 160,578,350 | $ | 163,586,195 | $ | (3,007,845 | ) | |||||
The $488,198 increase in cash and cash equivalents is discussed below in the “Liquidity and Capital Resources” section where cash flows are addressed.
The $6,363,994 decrease in assets held in trust under the coinsurance agreement is due to a reduction in assets under TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company that is administered on a funds withheld basis.
The increase in deferred policy acquisition costs for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Balance, beginning of year |
$ | 70,437,017 | $ | 69,399,366 | ||||
|
Capitalization of commissions, sales and issue expenses |
7,025,076 | 6,106,464 | ||||||
|
Amortization |
(3,824,306 | ) | (4,740,915 | ) | ||||
|
Increase |
3,200,770 | 1,365,549 | ||||||
|
Balance, end of period |
$ | 73,637,787 | $ | 70,764,915 | ||||
Our other assets as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Advances to mortgage loan originator |
$ | 5,195,898 | $ | 4,722,878 | $ | 473,020 | ||||||
|
Federal and state income taxes recoverable |
4,932,726 | 5,890,172 | (957,446 | ) | ||||||||
|
Lease asset - right to use |
855,741 | 924,201 | (68,460 | ) | ||||||||
|
Accrued management fee |
499,149 | 498,389 | 760 | |||||||||
|
Other receivables, prepaid assets and deposits |
171,261 | 138,254 | 33,007 | |||||||||
|
Notes receivable |
13,389 | 14,791 | (1,402 | ) | ||||||||
|
Receivable for securities |
1,292 | - | 1,292 | |||||||||
|
Total other assets |
$ | 11,669,456 | $ | 12,188,685 | $ | (519,229 | ) | |||||
There was a $473,020 increase in advances to one mortgage loan originator who acquires residential mortgage loans for our life companies.
There was a $957,446 decrease in federal and state income taxes recoverable primarily due to receiving a federal income tax refund of $1,817,859 for the tax year 2023.
Our liabilities as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Policy liabilities |
||||||||||||
|
Policyholders' account balances |
$ | 438,119,994 | $ | 417,120,647 | $ | 20,999,347 | ||||||
|
Future policy benefits |
154,389,687 | 149,228,807 | 5,160,880 | |||||||||
|
Policy claims |
3,069,138 | 3,143,579 | (74,441 | ) | ||||||||
|
Other policy liabilities |
358,380 | 244,081 | 114,299 | |||||||||
|
Total policy liabilities |
595,937,199 | 569,737,114 | 26,200,085 | |||||||||
|
Funds withheld under coinsurance agreement |
14,187,769 | 20,001,969 | (5,814,200 | ) | ||||||||
|
Deferred federal income taxes |
6,855,370 | 6,584,494 | 270,876 | |||||||||
|
Other liabilities |
8,866,954 | 6,288,104 | 2,578,850 | |||||||||
|
Total liabilities |
$ | 625,847,292 | $ | 602,611,681 | $ | 23,235,611 | ||||||
The increase in policyholders’ account balances for the six months ended June 30, 2026 and 2025, are summarized as follows:
|
(Unaudited) |
||||||||
|
Six Months Ended June 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Policyholders' account balances, beginning |
$ | 417,120,647 | $ | 431,190,092 | ||||
|
Deposits |
40,372,473 | 18,392,643 | ||||||
|
Withdrawals |
(35,590,495 | ) | (32,789,147 | ) | ||||
|
Change in funds withheld under coinsurance agreement |
6,491,712 | 5,750,119 | ||||||
|
Interest credited |
9,725,657 | 9,589,981 | ||||||
|
Increase |
20,999,347 | 943,596 | ||||||
|
Policyholders' account balances, ending |
$ | 438,119,994 | $ | 432,133,688 | ||||
The $5,814,200 decrease in funds withheld under coinsurance agreement is due to surrenders of coinsured annuity contracts under coinsurance agreement with an offshore annuity and life insurance company.
The $5,160,880 increase in future policy benefits during the six months ended June 30, 2026, is primarily related to the production of new life insurance policies and the aging of existing policies an additional year.
The $270,876 increase in deferred federal income taxes during the six months ended June 30, 2026 was due to $532,235 of operating deferred federal tax expense that exceeds $261,359 decrease in deferred federal income taxes on the unrealized investment gains (losses) from fixed maturity securities, preferred stock and other long-term investments and remeasurement gains (losses) on future policy benefits related to discount rate.
Our other liabilities as of June 30, 2026 and December 31, 2025 are summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Suspense accounts payable |
$ | 5,203,644 | $ | 568,025 | $ | 4,635,619 | ||||||
|
Mortgage loans suspense |
1,278,129 | 3,179,575 | (1,901,446 | ) | ||||||||
|
Lease liability |
855,741 | 924,201 | (68,460 | ) | ||||||||
|
Unclaimed funds |
681,703 | 658,404 | 23,299 | |||||||||
|
Accrued expenses payable |
498,000 | 687,000 | (189,000 | ) | ||||||||
|
Unearned investment income |
195,573 | 169,315 | 26,258 | |||||||||
|
Accounts payable |
123,429 | 113,285 | 10,144 | |||||||||
|
Guaranty fund assessments |
55,000 | 55,000 | - | |||||||||
|
Deferred revenue |
13,750 | 19,250 | (5,500 | ) | ||||||||
|
Other payables, withholdings and escrows |
(38,015 | ) | (85,951 | ) | 47,936 | |||||||
|
Total other liabilities |
$ | 8,866,954 | $ | 6,288,104 | $ | 2,578,850 | ||||||
The $4,635,619 increase in suspense accounts payable is due to increased annuity deposits on policy applications that had not been issued as of the financial reporting date.
The decrease in mortgage loan suspense of $1,901,446 is primarily due to timing of principal loan payments on mortgage loans.
The decrease in accrued expenses payable of $189,000 is primarily due to the timing of outstanding invoices and premium tax payments.
Liquidity and Capital Resources
Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through June 30, 2026, we have received $27,119,480 from the sale of our shares.
The Company raised $1,450,000 from two private placements during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012; and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.
The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital.
In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to common stock and additional paid-in capital.
The Company has also purchased 247,580 shares of treasury stock at a cost of $893,947 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.
In settlement of a lawsuit, the Company was awarded 50,936 shares of its own Class A common stock. The 50,936 shares of the Company’s Class A common stock were transferred to treasury stock at a cost basis of $85,422.
As of June 30, 2026, we had cash and cash equivalents totaling $39,984,625. As of June 30, 2026, cash and cash equivalents of $18,054,344 and $11,744,454, respectively, totaling $29,798,798 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the Oklahoma Insurance Department of any dividend or intercompany transaction to transfer funds to FTFC. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year.
Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $532,472 as of December 31, 2025. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $2,899,895 in 2026 without prior approval. FBLIC has paid no dividends to TLIC in 2026 and 2025. TLIC has paid no dividends to FTFC.
The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures interest and non-interest bearing accounts up to $250,000. Uninsured balances aggregate $35,426,681 and $34,131,790 as of June 30, 2026 and December 31, 2025, respectively. Other funds are invested in mutual funds that invest in U.S. government securities. We monitor the solvency of all financial institutions in which we have funds to minimize the exposure for loss. The Company has not experienced any losses in such accounts.
Our cash flows for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Net cash provided by operating activities |
$ | 25,499,662 | $ | 17,480,974 | $ | 8,018,688 | ||||||
|
Net cash used in investing activities |
(29,793,442 | ) | (29,825,840 | ) | 32,398 | |||||||
|
Net cash provided by (used in) financing activities |
4,781,978 | (14,396,504 | ) | 19,178,482 | ||||||||
|
Increase (decrease) in cash and cash equivalents |
488,198 | (26,741,370 | ) | 27,229,568 | ||||||||
|
Cash and cash equivalents, beginning of period |
39,496,427 | 64,344,122 | (24,847,695 | ) | ||||||||
|
Cash and cash equivalents, end of period |
$ | 39,984,625 | $ | 37,602,752 | $ | 2,381,873 | ||||||
The cash provided by operating activities for the six months ended June 30, 2026 and 2025 are summarized as follows:
|
(Unaudited) |
||||||||||||
|
Six Months Ended June 30, |
Amount Change |
|||||||||||
|
2026 |
2025 |
2026 less 2025 |
||||||||||
|
Premiums collected |
$ | 22,499,614 | $ | 21,194,606 | $ | 1,305,008 | ||||||
|
Net investment income collected |
15,930,482 | 14,523,204 | 1,407,278 | |||||||||
|
Service fees and other income collected |
1,308,782 | 3,050,287 | (1,741,505 | ) | ||||||||
|
Death benefits paid |
(8,095,736 | ) | (7,502,264 | ) | (593,472 | ) | ||||||
|
Surrenders paid |
(1,580,492 | ) | (1,526,108 | ) | (54,384 | ) | ||||||
|
Dividends and endowments paid |
(232,512 | ) | (232,848 | ) | 336 | |||||||
|
Commissions paid |
(7,255,245 | ) | (5,790,625 | ) | (1,464,620 | ) | ||||||
|
Other underwriting, insurance and acquisition expenses paid |
(6,568,002 | ) | (6,023,246 | ) | (544,756 | ) | ||||||
|
Taxes received (paid) |
399,676 | (1,925,488 | ) | 2,325,164 | ||||||||
|
Increased advances to mortgage loan originator |
(473,020 | ) | (279,645 | ) | (193,375 | ) | ||||||
|
Decreased funds under coinsurance agreement |
7,041,506 | 5,585,504 | 1,456,002 | |||||||||
|
Increased (decreased) deposits of pending policy applications |
4,635,619 | (2,236,917 | ) | 6,872,536 | ||||||||
|
Decreased mortgage loan suspense |
(1,901,446 | ) | (1,154,384 | ) | (747,062 | ) | ||||||
|
Other |
(209,564 | ) | (201,102 | ) | (8,462 | ) | ||||||
|
Cash provided by operating activities |
$ | 25,499,662 | $ | 17,480,974 | $ | 8,018,688 | ||||||
Please see the statements of cash flows for the six months ended June 30, 2026 and 2025 for a summary of the components of net cash used in investing activities and net cash provided by financing activities.
Our shareholders’ equity as of June 30, 2026 and December 31, 2025 is summarized as follows:
|
(Unaudited) |
Amount Change |
|||||||||||
|
June 30, 2026 |
December 31, 2025 |
2026 less 2025 |
||||||||||
|
Shareholders' equity |
||||||||||||
|
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of June 30, 2026 and December 31, 2025, 9,631,920 issued as of June 30, 2026 and December 31, 2025, 9,333,404 outstanding as of June 30, 2026 and December 31, 2025) |
$ | 96,319 | $ | 96,319 | $ | - | ||||||
|
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of June 30, 2026 and December 31, 2025) |
1,011 | 1,011 | - | |||||||||
|
Additional paid-in capital |
43,668,023 | 43,668,023 | - | |||||||||
|
Treasury stock, at cost (298,516 shares as of June 30, 2026 and December 31, 2025) |
(979,369 | ) | (979,369 | ) | - | |||||||
|
Accumulated other comprehensive loss |
7,517,351 | 8,500,556 | (983,205 | ) | ||||||||
|
Accumulated earnings |
38,936,474 | 35,286,058 | 3,650,416 | |||||||||
|
Total shareholders' equity |
$ | 89,239,809 | $ | 86,572,598 | $ | 2,667,211 | ||||||
The increase in shareholders’ equity of $2,667,211 for the six months ended June 30, 2026 is due to $3,650,416 in net income and $983,205 decrease in accumulated other comprehensive loss.
The liquidity requirements of our life insurance companies are met primarily by funds provided from operations. Premium and annuity consideration deposits, investment income and investment maturities are the primary sources of funds, while investment purchases, policy benefits, and operating expenses are the primary uses of funds. There were no liquidity issues in 2026 or 2025. Our investments include marketable debt securities that could be readily converted to cash for liquidity needs.
We are subject to various market risks. The quality of our investment portfolio and the current level of shareholders’ equity continue to provide a sound financial base as we strive to expand our marketing to offer competitive products. Our investment portfolio had unrealized investment gains (losses) from fixed maturity securities, preferred stock and other long-term investments of ($8,700,076) and ($6,113,632) as of June 30, 2026 and December 31, 2025, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $2,539,087 in unrealized losses arising for the six months ended June 30, 2026 has been impacted by 2026 net realized investment gains of $47,357 originating from the sale and call activity for fixed maturity securities available-for-sale resulting in net unrealized investment losses from fixed maturity securities, preferred stock and other long-term investments of $2,586,444.
A primary liquidity concern is the risk of an extraordinary level of early policyholder withdrawals. We include provisions within our insurance policies, such as surrender charges, that help limit and discourage early withdrawals. Individual life insurance policies are less susceptible to withdrawal than annuity reserves and deposit liabilities because policyholders may incur surrender charges and undergo a new underwriting process in order to obtain a new insurance policy. Cash flow projections and cash flow tests under various market interest rate scenarios are also performed annually to assist in evaluating liquidity needs and adequacy. We currently anticipate that available liquidity sources and future cash flows will be adequate to meet our needs for funds.
One of our significant risks relates to the fluctuations in interest rates. Regarding interest rates, the value of our available-for-sale fixed maturity securities investment portfolio will increase or decrease in an inverse relationship with fluctuations in interest rates, while net investment income earned on newly acquired available-for-sale fixed maturity securities increases or decreases in direct relationship with interest rate changes.
From an income perspective, we are exposed to rising interest rates which could be a significant risk, as TLIC's and FBLIC’s annuity business is impacted by changes in interest rates. Life insurance company policy liabilities bear fixed rates. From a liquidity perspective, our fixed rate policy liabilities are relatively insensitive to interest rate fluctuations.
We believe gradual increases in interest rates do not present a significant liquidity exposure for the life insurance policies and annuity contracts. We maintain conservative durations in our fixed maturity portfolio.
As of June 30, 2026, cash and cash equivalents, short-term investments, the fair value of fixed maturity available-for-sale securities with maturities of less than one year and the fair value of lottery receivables with maturities of less than one year equaled 9.2% of total policy liabilities. If interest rates rise significantly in a short time frame, there can be no assurance that the life insurance industry, including the Company, would not experience increased levels of surrenders and reduced sales, and thereby be materially adversely affected.
In addition to the measures described above, TLIC and FBLIC must comply with the National Association of Insurance Commissioners promulgated Standard Valuation Law ("SVL") which specifies minimum reserve levels and prescribes methods for determining them, with the intent of enhancing solvency. Upon meeting certain tests, which TLIC and FBLIC met during 2025, the SVL also requires the Company to perform annual cash flow testing for TLIC and FBLIC. This testing is designed to ensure that statutory reserve levels will maintain adequate protection in a variety of potential interest rate scenarios. The Actuarial Standards Board of the American Academy of Actuaries also requires cash flow testing as a basis for the actuarial opinion on the adequacy of the reserves which is a required part of the annual statutory reporting process.
Our marketing plan could be modified to emphasize certain product types and reduce others. New business levels could be varied in order to find the optimum level. We believe that our current liquidity, current bond portfolio maturity distribution and cash position give us substantial resources to administer our existing business and fund growth generated by direct sales.
The operations of TLIC and FBLIC may require additional capital contributions to meet statutory capital and surplus requirements mandated by state insurance departments. Life insurance contract liabilities are generally long term in nature and are generally paid from future cash flows or existing assets and reserves. We will service other expenses and commitments by: (1) using available cash, (2) dividends from TLIC and FBLIC that are limited by law to the greater of prior year net operating income or 10% of prior year‑end surplus unless specifically approved by the controlling insurance department, (3) public and private offerings of our common stock and (4) corporate borrowings, if necessary.
Effective January 1, 2019, the Company entered into a revised advance agreement with one loan originator. As of June 30, 2026, the Company has outstanding advances to this loan originator totaling $5,195,898. The advances are secured by $9,380,778 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $1,804,102 to the loan originator that would result in additional security in the form of residential mortgage loans on real estate to be assigned to the Company.
Effective January 1, 2019, the Company also entered into a revised escrow agreement with the same loan originator. According to the revised terms of the escrow agreement, as of June 30, 2026, $1,012,490 of additional and secured residential mortgage loan balances on real estate are held in escrow by the Company. As of June 30, 2026, $1,003,023 that escrow amount is available to the Company as additional collateral on $5,195,898 of advances to the loan originator. The remaining June 30, 2026 escrow amount of $9,467 is available to the Company as additional collateral on its investment of $1,893,321 in residential mortgage loans on real estate.
We are not aware of any commitments or unusual events that could materially affect our capital resources. We are not aware of any current recommendations by any regulatory authority which, if implemented, would have a material adverse effect on our liquidity, capital resources or operations. We believe that our existing cash and cash equivalents as of June 30, 2026 will be sufficient to fund our anticipated operating expenses.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein are forward-looking statements. The forward-looking statements are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, and include estimates and assumptions related to economic, competitive and legislative developments. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning; and include, but are not limited to, statements regarding the outlook of our business and financial performance. These forward-looking statements are subject to change and uncertainty, which are, in many instances, beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect upon us.
There can be no assurance that future developments will be in accordance with our expectations, or that the effect of future developments on us will be as anticipated. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. These factors include among others:
|
● |
general economic conditions and financial factors, including the performance and fluctuations of fixed income, equity, real estate, credit capital and other financial markets; |
|
● |
differences between actual experience regarding mortality, morbidity, persistency, surrenders, investment returns, and our pricing assumptions establishing liabilities and reserves or for other purposes; |
|
● |
the effect of increased claims activity from natural or man-made catastrophes, pandemic disease, or other events resulting in catastrophic loss of life; |
|
● |
adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; |
|
● |
inherent uncertainties in the determination of investment allowances and impairments and in the determination of the valuation allowance on the deferred income tax asset; |
|
● |
investment losses and defaults; |
|
● |
competition in our product lines; |
|
● |
attraction and retention of qualified employees and agents; |
|
● |
ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks; |
|
● |
the availability, affordability and adequacy of reinsurance protection; |
|
● |
the effects of emerging claim and coverage issues; |
|
● |
the cyclical nature of the insurance business; |
|
● |
interest rate fluctuations; |
|
● |
changes in our experiences related to deferred policy acquisition costs; |
|
● |
the ability and willingness of counterparties to our reinsurance arrangements and derivative instruments to pay balances due to us; |
|
● |
impact of medical epidemics and viruses; |
|
● |
domestic or international military actions; |
|
● |
the effects of extensive government regulation of the insurance industry; |
|
● |
changes in tax and securities law; |
|
● |
changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies; |
|
● |
regulatory or legislative changes or developments; |
|
● |
the effects of unanticipated events on our disaster recovery and business continuity planning; |
|
● |
failures or limitations of our computer, data security and administration systems; |
|
● |
risks of employee error or misconduct; |
|
● |
the assimilation of life insurance businesses we acquire and the sound management of these businesses; and |
|
● |
the availability of capital to expand our business. |
It is not our corporate policy to make specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. In addition, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable developments.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 as amended (“Exchange Act”) as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is made known to management, including our Certifying Officers, as appropriate, to allow timely decisions regarding disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Changes to Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in two pending lawsuits.
A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn styled First Trinity Financial Corporation and Gregg E. Zahn vs. C. Wayne Pettigrew and Group & Pension Planners was originally filed in 2013 in the District Court of Tulsa County, Oklahoma against former Company Board of Director, C. Wayne Pettigrew was settled with the defendant on April 14, 2025.
The Company, through its life insurance subsidiary, TLIC, commenced two lawsuits as plaintiff, both in the New York Supreme Court, New York County, one on June 29, 2020 and another on March 4, 2022, for breach of contract against a company for failure to advance funding to lottery ticket winners to the detriment of TLIC and against various of that company’s associated persons for unjust enrichment and fraud perpetuated on TLIC. The cases are entitled “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, and Monica L. Ray, Index No. 652780/2020” (New York Supreme Court, New York County) and “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, Julie Casal, and Monica L. Ray, Index No. 651023/2022” (New York Supreme Court, New York County). The Company is vigorously prosecuting this case against the defendants. The Company faces no exposure in connection with either action since no counterclaims or cross claims have been made against the Company. Management believes that these lawsuits are not material in relation to the Company’s financial position or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
Item 6. Exhibits
|
31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|
31.2 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
|
32.1 |
|
32.2 |
|
101.INS** |
Inline XBRL Instance |
|
101.SCH** |
Inline XBRL Taxonomy Extension Schema |
|
101.CAL** |
Inline XBRL Taxonomy Extension Calculation |
|
101.DEF** |
Inline XBRL Taxonomy Extension Definition |
|
101.LAB** |
Inline XBRL Taxonomy Extension Labels |
|
101.PRE** |
Inline XBRL Taxonomy Extension Presentation |
|
104 |
Cover Page Interactive Data (formatted as Inline XBRL and continued in Exhibit 101) |
|
**XBRL |
Information is furnished and not filed as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FIRST TRINITY FINANCIAL CORPORATION | |||
| an Oklahoma corporation | |||
| August 13, 2026 | By: | /s/ Gregg E. Zahn | |
| Gregg E. Zahn, President and Chief Executive Officer | |||
| August 13, 2026 | By: | /s/ Jeffrey J. Wood | |
| Jeffrey J. Wood, Chief Financial Officer | |||