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United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the fiscal year ended December 31, 2023~~

~~☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~ For the ~~transition~~fiscal ~~period~~year ~~From_____________to_____________~~ended .December 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period Fromto.

Commission file number 000-52613

FIRST TRINITY FINANCIAL CORPORATION

(Exact name of small business issuer as specified in its charter)

Oklahoma	34-1991436	~~34-1991436~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer number)	~~(I.R.S. Employer number)~~
7633 East 63rd Place, Suite 230	Tulsa, Oklahoma	74133-1246
(Address of principal executive offices)

7633 East 63rd Place, Suite 230

Tulsa, Oklahoma

74133-1246

(Address of principal executive offices)

(918) 249-2438

(Issuer's telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

None

Securities registered pursuant to section 12(g) of the Exchange Act:

Title of Each Class

Class A Common Stock, $0.01 Par Value

Class B Common Stock, $0.01 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 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. Yes ☒ No ☐

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).

Yes ☒ No ☐

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):

Large accelerated filer: ☐ Accelerated filer: ☐ Non-accelerated ~~Filer~~filer: ☐☑ Smaller reporting company: ☑ Emerging growth company: ☐

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 checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Because of the absence of an established trading market for the common stock, the registrant is unable to calculate the aggregate market value of the voting stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 410, ~~2024~~2025, the registrant had 9,384,340 shares of Class A common stock, 0.01 par value, outstanding and 101,102 shares of Class B common stock, 0.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be used in connection with its ~~2024~~2025 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this Form 10-K, are incorporated by reference into Part III of this report.

FIRST TRINITY FINANCIAL CORPORATION

TABLE OF CONTENTS

Part I
Item 1.	Business	4
Item 2.	Properties	910
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosures	11
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	11
Item 6	Reserved	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 8.	Financial Statements	3736
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	8385
Item 9A.	Controls and Procedures	8385
Item 9B.	Other Information	8486
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	8487
Item 11.	Executive Compensation	8491
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8497
Item 13.	Certain Relationships and Related Transactions, and Director Independence	8498
Item 14.	Principal Accounting Fees and Services.	8499
Item 15.	Exhibits	84100
Item 16.	Form 10-K Summary	84100
Exhibit index		85101
Signatures		87102

Exhibit 21.1

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 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

Item 1. Business

Business Development

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 and operating a life insurance subsidiary.

TLIC’s and FBLIC’s current product portfolio consists of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term, final expense, accidental death and dismemberment policies and annuity contracts. The term products are both renewable and convertible and issued for 10, 15, 20 and 30 years. They can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense policies are issued as either a simplified issue or as a graded benefit, determined by underwriting. The TLIC and FBLIC products are sold through independent agents.

TLIC is licensed in the states of Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and West Virginia. FBLIC is licensed 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.

The Company owns 100% of TMC that was incorporated in 2006 and began operations in January 2007. TMC’s primary focus changed during 2020 from premium financing loans to originating, brokering and administrating residential and commercial mortgage loans for third parties.

The Company owns 100% of TAI. TAI was incorporated in Barbados, West Indies on March 24, 2016 for the primary purpose of forming a life insurance company producing United States (U.S.) dollar denominated life insurance policies and annuity contracts outside of the United States and Barbados. TAI is licensed as an Exempt Insurance Company under the Exempt Insurance Act of Barbados. TAI was initially involved in developing life insurance contracts but is now issuing life insurance policies and annuity contracts through an association with distribution channels. The Company’s acquisition of TAI was formally approved by Barbados regulators and the certifications were received in 2019.

Company Capitalization

Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through December 31, ~~2023~~2024, 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 Class A 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.

Acquisitions

On December 23, 2008, FTFC acquired 100% of the outstanding common stock of First Life America Corporation (“FLAC”) from an unaffiliated company. The acquisition of FLAC was accounted for as a purchase. The aggregate purchase price for FLAC was $2,695,234 including direct cost associated with the acquisition of $195,234. The acquisition of FLAC was financed with the working capital of FTFC.

On December 31, 2008, FTFC made FLAC a 15 year loan in the form of a surplus note in the amount of $250,000 with an interest rate of 6% payable monthly, that was approved by Oklahoma Insurance Department (“OID”). This surplus note is eliminated in consolidation.

On August 31, 2009, two 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 100% of the outstanding common stock of FBLIC from FBLIC’s shareholders. The acquisition of FBLIC was accounted for as a purchase. The aggregate purchase price for the acquisition of FBLIC was $13,855,129. The acquisition of FBLIC was financed with the working capital of TLIC.

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 $3,644,839 (including cash), assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.

On April 3, 2018, FTFC acquired 100% of the outstanding stock of TAI domiciled in Barbados, West Indies. The Barbados regulators approved the acquisition and supplied certifications during 2019. The aggregate purchase price for the acquisition of TAI was $250,000. The acquisition of TAI was financed with the working capital of FTFC.

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 acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.

On January 4, 2022, FTFC acquired Royalty Capital Life Insurance Company (“RCLIC”) from Royalty Capital Corporation (“Royalty”) in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. The acquisition of RCLIC was accounted for as a purchase and the net acquisition consideration was recorded at $4,596,764. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance ~~(“MDCI”)~~ approved FTFC’s contribution and merger of RCLIC into FBLIC.

Financial Information about Segments

The Financial Accounting Standards Board (“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 Item 8 below and Note 11 to the consolidated financial statements as of and for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 for additional information regarding segment information.

Life Insurance and Annuity Operations

Our Life Insurance and Annuity Operations consists of issuing ordinary whole life insurance, endowments, modified premium whole life with an annuity rider, term, final expense and accidental death and dismemberment policies and annuity contracts. The policies can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense policies are issued as either a simplified issue or as a graded benefit, determined by underwriting. Our products are marketed through independent agents.

FBLIC renewed its administrative services agreement with Investors Heritage Life Insurance Company (“IHLIC”) on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include underwriting, policy issue, accounting, claims processing and other services incidental to the operations of FBLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.

FBLIC executed an actuarial consulting services agreement with IHLIC on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include actuarial services for the operations of FBLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.

TLIC renewed its administrative services agreement with IHLIC on November 1, 2022, after a written extension of the previous administrative services agreement. Under the terms of this agreement, the services provided by IHLIC include underwriting, policy issue, accounting, claims processing and other services incidental to the operations of TLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.

TLIC executed an actuarial consulting services agreement with IHLIC on November 1, 2022. Under the terms of this agreement, the services provided by IHLIC include actuarial services for the operations of TLIC. The agreement is effective for a period of five (5) years from November 1, 2022 through October 31, 2027 and includes a provision that the agreement may be terminated at any time by either party with a 12 month written notice.

TLIC continues to seek to serve middle income households and markets its products through independent agents. TLIC was originally licensed in Oklahoma and with the acquisition of FLAC in late 2008, expanded into Illinois, Kansas, Kentucky, Nebraska, North Dakota, Ohio and Texas. With the acquisition of FBLIC in late 2011, we expanded into Arizona, Colorado, Missouri and New Mexico. FBLIC also had initial licenses in Kansas, Nebraska and Oklahoma where TLIC was also licensed. In late 2012, FBLIC was licensed in Arkansas, Indiana, Kentucky, North Dakota, South Dakota, Texas and West Virginia. In 2013, FBLIC was licensed in Illinois and Pennsylvania. In 2014, FBLIC was licensed in Georgia, Louisiana, Michigan, Mississippi, North Carolina, Ohio, Tennessee and Virginia. In 2015, FBLIC was licensed in Alabama and Utah. In 2018, FBLIC and TLIC were licensed in Montana. In 2019, TLIC was licensed in Tennessee. In 2020, TLIC was licensed in Alabama, Indiana, Louisiana, Mississippi, New Mexico, South Dakota and Utah. In 2021, TLIC was licensed in Georgia and West Virginia.

The following tables sets forth our direct collected life insurance premiums and annuity considerations by the policyholder’s state of residence at the time of premium collection and annuity consideration, for the most significant states in which we are licensed, for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, in accordance with statutory accounting practices prescribed by the states of domicile of TLIC and FBLIC.

	Year Ended December 31, 2023
	Year Ended December 31, 2024
	Life					Annuity
State	Premiums		Percentage			Considerations		Percentage
Alabama	$	~~925~~940,~~134~~009		2.93	%	$	-22,306		0.0002	%
Arizona		~~535~~555,~~611~~660		1.6973	%		~~824~~1,~~122~~209,314		10.2286	%
Arkansas		~~631~~703,~~492~~355		2.0019	%		5190,~~002~~258		0.0114	%
Colorado		~~964~~1,~~553~~015,152		3.0517	%		~~53,067~~909		0.0800	%
Georgia		1,708,051		5.40	%		1,046,986		1.54	%
Florida		89,843		0.28	%		1,550,448		1.11	%
Illinois		1,991,234		6.30	%		137,150		0.20	%
Georgia		1,711,581		5.34	%		3,185,002		2.27	%
Indiana		1,286,901		4.07	%		3,380,944		4.99	%
Illinois		1,950,364		6.09	%		1,205,801		0.86	%
Kansas		1,716,912		5.43	%		1,952,140		2.88	%
Indiana		1,318,628		4.11	%		6,494,206		4.64	%
Kentucky		1,009,116		3.19	%		-		0.00	%
Kansas		1,624,449		5.07	%		6,474,856		4.62	%
Louisiana		892,269		2.82	%		49,900		0.07	%
Kentucky		1,012,984		3.16	%		526,578		0.38	%
Michigan		677,515		2.14	%		255,029		0.38	%
Louisiana		977,336		3.05	%		-		0.00	%
Missouri		1,626,367		5.15	%		286,550		0.42	%
Michigan		723,454		2.26	%		2,302,557		1.64	%
Nebraska		392,476		1.24	%		5,953,567		8.78	%
Minnesota		5,344		0.02	%		1,018,473		0.73	%
North Carolina		3,441,716		10.89	%		12,118,420		17.87	%
Mississippi		527,418		1.65	%		707,675		0.51	%
North Dakota		75,454		0.24	%		15,384,458		22.68	%
Missouri		1,592,662		4.97	%		1,993,787		1.42	%
Ohio		3,419,283		10.82	%		1,725		0.00	%
Nebraska		410,874		1.28	%		11,620,434		8.30	%
Oklahoma		1,044,670		3.31	%		680,666		1.00	%
North Carolina		3,604,383		11.25	%		26,167,970		18.68	%
Pennsylvania		1,211,847		3.83	%		505,058		0.74	%
North Dakota		77,322		0.24	%		25,914,663		18.50	%
South Carolina		34,346		0.11	%		997,303		1.47	%
Ohio		3,332,358		10.40	%		2,196,163		1.57	%
Tennessee		1,170,322		3.70	%		343,350		0.51	%
Oklahoma		1,012,009		3.16	%		6,358,136		4.54	%
Texas		4,750,577		15.04	%		21,485,887		31.68	%
Pennsylvania		1,097,077		3.42	%		1,606,370		1.15	%
Virginia		933,283		2.95	%		1,166,022		1.72	%
South Carolina		38,131		0.12	%		791,246		0.56	%
All other states		1,168,264		3.70	%		1,191,523		1.76	%
South Dakota		14,725		0.05	%		900,236		0.64	%
Total direct collected premiums and considerations	$	31,607,393		100.00	%	$	67,818,869		100.00	%
Tennessee		1,226,524		3.83	%		1,005,778		0.72	%
Texas		4,799,546		14.96	%		33,003,935		23.55	%
Virginia		1,044,554		3.26	%		2,458,685		1.76	%
All other states		645,640		2.01	%		1,163,091		0.83	%
Total direct collected premiums and considerations	$	32,051,382		100.00	%	$	140,068,877		100.00	%

	Year Ended December 31, 2022
	Life					Annuity
State	Premiums		Percentage			Considerations		Percentage
Alabama	$	921,920		2.99	%	$	25,000		0.04	%
Arizona		442,595		1.43	%		269,566		0.43	%
Arkansas		566,066		1.83	%		16,747		0.03	%
Colorado		973,082		3.15	%		100,862		0.16	%
Georgia		1,654,780		5.36	%		1,818,675		2.89	%
Illinois		2,006,450		6.50	%		111,400		0.18	%
Indiana		1,289,690		4.18	%		1,136,537		1.81	%
Kansas		1,820,746		5.90	%		716,355		1.14	%
Kentucky		1,044,357		3.39	%		-		0.00	%
Louisiana		862,247		2.80	%		-		0.00	%
Michigan		629,161		2.04	%		7,000		0.01	%
Missouri		1,561,917		5.06	%		179,761		0.29	%
Nebraska		324,863		1.05	%		746,395		1.19	%
North Carolina		3,178,613		10.30	%		10,850,213		17.27	%
North Dakota		72,958		0.24	%		9,781,465		15.57	%
Ohio		3,553,991		11.52	%		58,260		0.09	%
Oklahoma		1,088,430		3.53	%		1,056,389		1.68	%
Pennsylvania		1,154,154		3.74	%		632,396		1.01	%
South Carolina		35,316		0.11	%		613,483		0.98	%
Tennessee		1,121,426		3.64	%		100,560		0.16	%
Texas		4,685,265		15.20	%		33,306,666		52.99	%
Virginia		804,417		2.61	%		677,730		1.08	%
All other states		1,056,096		3.43	%		630,707		1.00	%
Total direct collected premiums and considerations	$	30,848,540		100.00	%	$	62,836,167		100.00	%

	Year Ended December 31, 2023
	Life					Annuity
State	Premiums		Percentage			Considerations		Percentage
Alabama	$	925,134		2.93	%	$	-		0.00	%
Arizona		535,611		1.69	%		824,122		1.22	%
Arkansas		631,492		2.00	%		5,002		0.01	%
Colorado		964,553		3.05	%		53,067		0.08	%
Florida		86,616		0.27	%		6,462		0.01	%
Georgia		1,708,051		5.40	%		1,046,986		1.54	%
Illinois		1,991,234		6.30	%		137,150		0.20	%
Indiana		1,286,901		4.07	%		3,380,944		4.99	%
Kansas		1,716,912		5.43	%		1,952,140		2.88	%
Kentucky		1,009,116		3.19	%		-		0.00	%
Louisiana		892,269		2.82	%		49,900		0.07	%
Michigan		677,515		2.14	%		255,029		0.38	%
Minnesota		6,906		0.02	%		235,977		0.35	%
Mississippi		454,247		1.44	%		11,650		0.02	%
Missouri		1,626,367		5.15	%		286,550		0.42	%
Nebraska		392,476		1.24	%		5,953,567		8.78	%
North Carolina		3,441,716		10.89	%		12,118,420		17.87	%
North Dakota		75,454		0.24	%		15,384,458		22.68	%
Ohio		3,419,283		10.82	%		1,725		0.00	%
Oklahoma		1,044,670		3.31	%		680,666		1.00	%
Pennsylvania		1,211,847		3.83	%		505,058		0.74	%
South Carolina		34,346		0.11	%		997,303		1.47	%
South Dakota		10,615		0.03	%		179,360		0.26	%
Tennessee		1,170,322		3.70	%		343,350		0.51	%
Texas		4,750,577		15.05	%		21,485,887		31.68	%
Virginia		933,283		2.95	%		1,166,022		1.72	%
All other states		609,880		1.93	%		758,074		1.12	%
Total direct collected premiums and considerations	$	31,607,393		100.00	%	$	67,818,869		100.00	%

Reinsurance

TLIC cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth and risk diversification. TLIC reinsures all amounts of risk on any one life in excess of $100,000 for individual life insurance with IHLIC, Optimum Re Insurance Company (“Optimum Re”), RGA Reinsurance Company and Wilton Reassurance Company (“Wilton Re”).

The Company also assumes reinsurance under various agreements allowing management to increase growth in assets and profitability. TLIC is a party to an Automatic Retrocession Pool Agreement (the “Reinsurance Pool”) with Optimum Re, Catholic Order of Foresters, American Home Life Insurance Company and Woodmen of the World. The agreement provides for automatic retrocession of coverage in excess of Optimum Re’s retention on business ceded to Optimum Re by the other parties to the Reinsurance Pool. TLIC’s maximum exposure on any one insured under the Reinsurance Pool is $100,000. As of January 1, 2008, the Reinsurance Pool stopped accepting new cessions.

Effective September 29, 2005, FLAC and Wilton Re executed a binding letter of intent whereby both parties agreed that FLAC would cede the simplified issue version of its Golden Eagle Whole Life (Final Expense) product to Wilton Re on a 50/50 quota share original term coinsurance basis. The letter of intent was executed on a retroactive basis to cover all applicable business issued by FLAC subsequent to January 1, 2005. Wilton Re agreed to provide various commission and expense allowances to FLAC in exchange for FLAC ceding 50% of the applicable premiums to Wilton Re as they were collected. As of June 24, 2006, Wilton Re terminated the reinsurance agreement for new business issued after the termination date.

FBLIC also participates in reinsurance in order to provide risk diversification, additional capacity for future growth and limit the maximum net loss potential arising from large amounts of risk. FBLIC reinsures initial amounts of risk on any one life in excess of $100,000 for individual life insurance with Optimum Re. TLIC and FBLIC also reinsure its accidental death benefit portion of their life policies under a bulk agreement with Optimum Re. To the extent that the reinsurance companies are unable to meet their obligations under the reinsurance agreements, TLIC and FBLIC remain primarily liable for the entire amount at risk.

Coinsurance

Effective January 1, 2018, TLIC entered into an annuity coinsurance agreement with an offshore annuity and life insurance company whereby 90% of TLIC’s annuity considerations originated after December 31, 2017 were ceded to the assuming company. The assuming company contractually reimburses TLIC for the related commissions, withdrawals, settlements, interest credited, submission costs, maintenance costs, marketing costs, excise taxes and other costs plus a placement fee. Effective April 1, 2020, the Company and an offshore annuity and life insurance company mutually agreed that the Quota Share under its existing reinsurance agreement shall be 0% for future business instead of the original contractual amount of 90%.

In accordance with this annuity coinsurance agreement, 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 2019, TLIC entered into a life insurance coinsurance agreement with TAI, effective October 1, 2018, whereby 100% of TAI’s life insurance policies and annuity contracts issued after September 30, 2018 were ceded to TLIC. TLIC contractually reimburses TAI for the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of life insurance policies and annuity contracts.

In 2022, FBLIC entered into group life insurance coinsurance agreement with Texas Republic Life Insurance Company (“TRLIC”), whereby generally 50% of TRLIC group life insurance policies and premiums were ceded to FBLIC. FBLIC contractually reimburses TRLIC for generally 50% of the related commissions, submission costs, maintenance costs, marketing costs and other costs related to the production of group life insurance policies.

Competition

The U.S. life insurance industry is a mature industry that has experienced little to no growth. Competition is intense because the life insurance industry is consolidating, with larger, more efficient and more effective organizations emerging from consolidation. In addition, legislation became effective in the United States that permits commercial banks, insurance companies and investment banks to combine. These factors have increased competitive pressures in general.

Many domestic life insurance companies have significantly greater financial, marketing and other resources, longer business histories and more diversified lines of insurance products than we do. We also face competition from companies marketing in person as well as with direct mail and internet sales campaigns. Although we may be at a competitive disadvantage to these entities, we believe that our premium rates, policy features, marketing approaches and policyholder services are generally competitive with those of other life insurance companies selling similar types of products and provide us with niche marketing opportunities not actively pursued by other life insurance companies.

Governmental Regulation

TLIC and FBLIC are subject to regulation and supervision by the OID. The insurance laws of Oklahoma give the OID broad regulatory authority, including powers to: (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct; (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus and (x) regulate the type and amount of permitted investments. TLIC and FBLIC can be required, under the solvency or guaranty laws of most states in which they do business, to pay assessments (up to prescribed limits) to fund policyholder losses or liabilities of other insurance companies that become insolvent. These assessments may be deferred or foregone under most guaranty laws if they would threaten an insurer’s financial strength and, in certain instances, may be offset against future premium taxes.

TLIC and FBLIC are subject to Oklahoma laws that limit the amount of dividends insurance companies can pay to stockholders without approval of the Departments of Insurance. 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 $2,247,082 as of December 31, 2023. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,373,511 in 2024 without prior approval. In 2022, FBLIC paid a $3,200,000 dividend to TLIC, of which $1,495,631 was considered ordinary and $1,704,369 was considered extraordinary. FBLIC has paid no dividends TLIC in 2023. These dividends would be eliminated in consolidation. TLIC has paid no dividends to FTFC.9

TLIC and FBLIC are subject to Oklahoma laws that limit the amount of dividends insurance companies can pay to stockholders without approval of the Departments of Insurance. 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 $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC.

There are certain factors particular to the life insurance business which may have an adverse effect on the statutory operating results of TLIC and FBLIC. One such factor is that the costs associated with issuing a new policy in force is usually greater than the first year’s policy premium. Accordingly, in the early years of a new life insurance company, these initial costs and the required provisions for reserves often have an adverse effect on statutory operating results.

Employees

As of March 710, ~~2024~~2025, the Company had nineteen full-time employees.

Item 2. Properties

TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $~~409~~280,~~436~~000. ~~FBLIC~~During ~~owns~~2024, ~~approximately~~the ~~one-half~~company ~~acre~~recognized an impairment loss of ~~undeveloped~~$129,436 ~~land~~from ~~located~~a inmarket ~~Jefferson~~value ~~City,~~appraisal ~~Missouri~~that ~~with~~resulted ain ~~carrying~~fair value ofestimation ~~$131,000~~less than the carrying value.

~~During~~FBLIC ~~2022,~~owns ~~the~~approximately ~~Company~~one-half ~~sold~~acre ~~investment~~of ~~real~~undeveloped ~~estate~~land ~~property~~located ~~with~~in anJefferson ~~aggregate carrying value of $147~~City,~~909.~~ ~~The~~Missouri ~~Company~~with ~~recorded~~ a ~~gross~~carrying ~~realized~~value ~~investment gain on sale~~ of $52131,~~171 based on an aggregate sales price of $200,080~~000.

9 During 2024, the Company sold investment real estate property with an aggregate carrying value of $265,705. The Company recorded a gross realized investment gain on sale of $11,251 based on an aggregate sales price of $276,956.

During 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and transferred those properties to investment real estate held for sale. During 2023, the Company foreclosed on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.

Item 3. 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 three pending lawsuits.

A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn (“Mr. 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 (“Mr. Pettigrew”). The Company and Mr. Zahn alleged that Mr. Pettigrew defamed Mr. Zahn and the Company and that Mr. Pettigrew breached his fiduciary duties to the Company by making untrue statements about the Company and Mr. Zahn to the press, state regulators and to certain shareholders.

In February 2017, the lawsuit resulted in a jury verdict in favor of the Company and Mr. Zahn, with the jury awarding damages of $800,000 to the Company and $3,500,000 to Mr. Zahn. In February 2020, the Oklahoma Court of Civil Appeals, upon an appeal by Mr. Pettigrew, reversed the judgment and remanded the case for a new trial. A Petition for Certiorari review with the Oklahoma Supreme Court by the Company and Mr. Zahn was declined in December, 2020. The case is now scheduled to be retried in the District Court once a trial date is set. The Company is vigorously prosecuting this case. The Company faces no exposure in connection with this action since there ~~were~~are no counterclaims or cross claims made against the Company. Management believes that this lawsuit is not material in relation to the Company’s financial position or results of operations.

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 this lawsuit is not material in relation to the Company’s financial position or results of operations.

The third lawsuit, filed on November 7, 2018, involves an insurance holding company and its insurance subsidiaries as plaintiffs in the District Court of Travis County, Texas, entitled Citizens, Inc., CICA Life Ltd., and CICA Life Insurance Company of America, v. Randall H. Riley, Citizens American Life, LLC, Citizens American Life, Inc., Alexis Delgado, Carlos Landa, Enrique Ruiz, Johan Silva, Esperanza Delgado, Michael Buchweitz, Jonathan Pollio, Steven Rekedal, First Trinity Financial Corporation, Trinity American, Inc., and International Marketing Group S.A. LLC, defendants. The plaintiffs claimed common law unfair competition, misappropriation of trade secrets under the Texas Uniform Trade Secrets Act and various breaches of and interference with contracts. Several of the individual defendants counterclaimed seeking damages for breach of contract based on commissions they were denied due to wrongful termination of their sales agreement by the plaintiffs. Trial of the case occurred from February 26, 2024 through March 8, 2024 and the defendants offered a vigorous defense. In its verdict, delivered on March 8, 2024, the jury confirmed the Company’s position that the plaintiffs’ claims were without merit, found no liability on any cause of action against the Company and awarded no damages against any defendant. In addition, the jury found the plaintiffs owed over $1.2 million to two individual defendants for wrongfully withheld sales commissions.

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 4. Mine Safety Disclosures

None

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

(a) Market Information ~~Trading of the Company’s common stock is limited and an established public market does not exist.~~

Trading of the Company’s common stock is limited and an established public market does not exist.

(b)

Holders

As of March 7, ~~2024~~2025, there were approximately 7,800 shareholders of the Company’s outstanding common stock.

FTFC has authorized 40,000,000 shares of Class A common stock and 10,000,000 shares of Class B common stock. 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, 85% of cash dividends, stock dividends or amounts due upon any FTFC merger, sale or liquidation event. FTFC’s Class B shareholders may also convert one share of FTFC’s Class B common stock for a .85 share of FTFC’s Class A common stock. FTFC’s Class A shareholders will elect the remaining Board of Directors members and will receive 100% of cash dividends, stock dividends or amounts due upon any Company merger, sale or liquidation event.

(c)

Dividends

Prior to 2020, we had never declared or paid cash dividends on our common stock. In 2020, our Board of Directors declared and paid a $0.05 per share cash dividend (amounting to $393,178) on our Class A common stock.

The Board of Directors of the Company has not adopted a formal dividend payment policy. The timing, declaration and payment of future dividends to holders of our common stock fall within the discretion of our Board of Directors and will depend on our operating results, earnings, financial condition, the capital requirements of our business and other factors.

Provisions of the Oklahoma Insurance Code relating to insurance holding companies subject transactions between the Company and TLIC and the Company and FBLIC, including dividend payments, to certain standards generally intended to prevent such transactions from adversely affecting the adequacy of life insurance subsidiaries’ capital and surplus available to support policyholder obligations. In addition, under the Oklahoma General Corporation Act, the Company may not pay dividends if, after giving effect to a dividend, it would not be able to pay its debts as they become due in the usual course of business or if its total liabilities would exceed its total assets.

On January 10, 2011, the Company’s Board of Directors approved a 5% share dividend by which shareholders received a share of common stock for each 20 shares of common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of March 10, 2011. Fractional shares were rounded to the nearest whole number of shares. The Company issued 323,777 shares in connection with the stock dividend.

On January 11, 2012, the Company’s Board of Directors approved another 5% share dividend by which shareholders received a share of common stock for each 20 shares of common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of March 10, 2012. Fractional shares were rounded to the nearest whole number of shares. The Company issued 378,908 shares in connection with the stock dividend.

On November 12, 2020, the Company’s Board of Directors approved a 10% share dividend by which shareholders received a share of Class A common stock for each 10 shares of Class A common stock of the Company they hold. The dividend was payable to the holders of shares of the Corporation as of November 12, 2020. Fractional shares were rounded up to the nearest whole number of shares. The Company issued 791,339 shares in connection with the stock dividend.

(d)

Securities Authorized for Issuance Under Equity Compensation Plans

~~There~~In ~~are~~March no2020, ~~plans~~our ~~under~~Board formally adopted the 2019 Equity Incentive Plan which ~~equity~~had ~~securities~~been previously approved by our shareholders in 2019. Under the Plan, up to 1,000,000 shares of Class A Common Stock are authorized for issuance. No awards have been granted or shares issued pursuant to the Plan.

(e)

Performance Graph – Not Required

(f)

Purchases of Equity Securities by Issuer

~~During~~The ~~2012,~~Company ~~2013,~~did ~~2014~~not ~~and~~repurchase ~~2015,~~any ~~the~~of ~~Company~~its ~~repurchased 247,580~~ shares of ~~its~~ common stock atduring a2024 ~~total~~or 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 current 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 stock2023.

Item 6. Reserved

Item 7. 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 predominately 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.

Our profitability in the life insurance and annuity segments is a function of our ability to accurately price the policies that we write, adequately value life insurance business acquired, administer life insurance company acquisitions at an expense level that validates the acquisition cost and invest the premiums and annuity considerations in assets that earn investment income with a positive spread.

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.

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 accounting principles generally accepted in the United States (“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, value of insurance business acquired and policy liabilities. 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. We believe the following accounting policies, judgments and estimates are the most critical to the preparation of our consolidated financial statements.

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 has been a material change to the Company’s critical accounting policies and estimates involving Investments in Fixed Maturity Securities and Mortgage Loans on Real Estate since December 31, 2022 involving the current estimates of credit losses related to the Company’s first quarter 2023 adoption of Accounting Standards Update 2016-13 Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments and all related guidance dealing with the FASB’s pronouncements dealing with changes in accounting for and recognizing credit losses. These revised critical accounting policies are summarized as follows:

In first quarter 2023, the Company adopted Accounting Standards Update 2016-13 Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments and all related guidance dealing with the FASB’s pronouncements dealing with changes in accounting for and recognizing credit losses.

Investments in Fixed Maturity Securities

WeFixed ~~hold fixed~~ maturity ~~interests~~securities incomprised ~~a variety~~ of ~~companies.~~bonds ~~The Company continuously evaluates the difference between the cost or amortized cost~~ and ~~estimated~~redeemable ~~fair~~preferred ~~value of its fixed maturity~~ securities toare ~~determine~~classified ~~whether~~as ~~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~~and toare ~~reflect~~carried ~~the~~at ~~amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the~~ fair value iswith ~~less~~unrealized ~~than~~gains ~~the~~and ~~amortized~~losses, ~~cost~~net ~~basis.~~of ~~Any~~applicable ~~remaining~~income ~~unrealized~~taxes, ~~loss~~reported ~~is recognized~~ in accumulated other comprehensive income. ~~(loss)~~The ~~with~~amortized ~~no change to the~~ cost ~~basis~~ of ~~the~~fixed ~~security.~~maturity ~~This~~securities ~~determination~~available-for-sale ~~involves~~is aadjusted ~~degree~~for amortization of ~~uncertainty.~~premium ~~Changes~~and inaccretion ~~the~~of ~~allowance~~discount ~~for~~to ~~credit losses are recognized in earnings~~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.

Prior to 2023, the Company evaluated the difference between the amortized cost and estimated fair value of its fixed maturity investments to determine whether any decline in fair value was other-than-temporary in nature. This determination involved a degree of uncertainty. If a decline in the fair value of a fixed maturity security was determined to be temporary, the decline was recognized in other comprehensive income (loss) within shareholders’ equity. If a decline in a security’s fair value was considered to be other-than-temporary, we then determined the proper treatment for the other-than-temporary impairment. For fixed maturity securities, the amount of any other-than-temporary impairment related to a credit loss was recognized in earnings and reflected as a reduction in the cost basis of the security. The amount of any other-than-temporary impairment related to other factors was recognized in other comprehensive income (loss) with no change to the cost basis of the security. The assessment of whether a decline in fair value was considered temporary or other-than-temporary included management’s judgment as to the financial position and future prospects of the entity issuing the security. It is not possible to accurately predict when it may be determined that a specific security will become impaired. If an other-than-temporary impairment related to a credit loss occurred with respect to a fixed maturity security, we amortized the reduced book value back to the security’s expected recovery value over the remaining term of the fixed maturity investment.

Mortgage Loans on Real Estate

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.

~~Mortgage~~Interest ~~loans on real estate 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.

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 will continue to record credit losses for mortgage loans not supported by funds held in escrow in accordance with its valuation policy for mortgage loans on real estate followed before 2023.

Prior to and continuing in 2023, the Company established a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow based on historical patterns. This allowance for possible loan losses from investments in mortgage loans on real estate continues to be a reserve established through a provision for possible loan losses charged to expense which represents, in our judgment, the known and inherent credit losses existing in the residential and commercial mortgage loan portfolio. This allowance, in the Company’s judgment, is necessary to reserve for estimated loan losses inherent in the residential and commercial mortgage loan portfolio and reduces the carrying value of investments in mortgage loans on real estate to the estimated net realizable value on the consolidated statement of financial position.

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.

Deferred Policy 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 in a systematic manner based on the related contract revenues or gross profits as appropriate. The recovery of deferred acquisition costs is dependent on the future profitability of the underlying business for which acquisition costs were incurred. Each reporting period, we evaluate the recoverability of the unamortized balance of deferred acquisition costs. We consider estimated future gross profits or future premiums; expected mortality or morbidity; interest earned and credited rates; persistency and expenses in determining whether the balance is recoverable.

If we determine a portion of the unamortized balance is not recoverable, it is immediately charged to amortization expense. The assumptions we use to amortize and evaluate the recoverability of the deferred acquisition costs involve significant judgment. A revision to these assumptions may impact future financial results. Deferred acquisition costs related to the successful production of new and renewal insurance business for traditional life insurance contracts are deferred to the extent deemed recoverable and amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities.

Deferred acquisition costs related to the successful production of new and renewal insurance and annuity products that subject us to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies. To the extent that realized gains and losses on securities result in adjustments to deferred acquisition costs related to insurance and annuity products, such adjustments are reflected as a component of the amortization of deferred acquisition costs.

Deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.

Value of Insurance Business Acquired

As a result of our purchases of FLAC and FBLIC, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under FASB guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. The recovery of the value of insurance business acquired is dependent on the future profitability of the underlying business that was initially recorded in the purchases of FLAC and FBLIC. Each reporting period, we evaluate the recoverability of the unamortized balance of the value of insurance business acquired.

For the amortization of the value of acquired insurance in force, the Company reviews its estimates of gross profits each reporting period. The most significant assumptions involved in the estimation of gross profits include interest rate spreads; future financial market performance; business surrender and lapse rates; mortality and morbidity; expenses and the impact of realized investment gains and losses. In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company is required to record a charge or credit to amortization expense for the period in which an adjustment is made.

As of December 31, 2023 and 2022, there was $4,962,525 and $4,691,773, respectively, of accumulated amortization of the value of insurance business acquired due to the purchases of FLAC and FBLIC. The Company expects to amortize the value of insurance business acquired by the following amounts over the next five years:, $169,840 in 2024, $152,011 in 2025, $157,225 in 2026, $148,123 in 2027 and $153,251 in 2028.

Future Policy Benefits

Our liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For life insurance and annuity products, expected mortality and morbidity is generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation.

Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality and morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses on a product by establishing premium deficiency reserves.

Estimating liabilities for our long-duration insurance contracts requires management to make various assumptions, including policyholder persistency, mortality rates, investment yields, discretionary benefit increases, new business pricing and operating expense levels.

Since many of these factors are interdependent and subject to short-term volatility during the long-duration contract period, substantial judgment is required. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.

Adopted Accounting Standards

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued updated guidance (Accounting Standards Update 2016-13) for the accounting for credit losses for financial instruments. The updated guidance applied a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables, including structured settlements that are recorded as part of reinsurance recoverables) and required an entity to estimate the credit losses expected over the life of an exposure or pool of exposures.

The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amended the current other-than-temporary impairment model for available-for-sale debt securities and requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The Company adopted this standard in first quarter 2023 on a modified retrospective basis. The cumulative effect adjustment to January 1, 2023 accumulated earnings for the adoption of this standard was a charge of $230,036.

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued amendments (Accounting Standards Update 2022-2) for the accounting of troubled debt restructuring and disclosures. The amendments introduced new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulties. The amendments promulgated that an entity must apply specific loan refinancing and restructuring guidance to determine whether a modification results in a new loan or the continuation of an existing loan. The amendments also required that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The Company adopted the amendments in this standard in first quarter 2023. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued amendments (Accounting Standards Update 2023-07) to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The amendments require public entities to follow the significant expense principle and disclose on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) with additional disclosure of the CODM’s title, position and how the reported measure(s) of segment profit or loss are used in assessing segment performance and allocating resources. In addition, amounts for other segment items are required to be disclosed including a description of its composition. If the COMD uses more than one measure in assessing segment performance and allocating resources, at least one of the measures should be consistent with the corresponding amounts utilized in the public entity’s consolidated financial statements.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted this Update for year-end reporting in 2024 and will adopt for interim periods beginning in 2025.

Cybersecurity Risk Management, Strategy, Governance and Incident Disclosures by Public Companies

On July 26, 2023, the U.S. Securities and Exchange Commission adopted this Final Rule (the “Cybersecurity Final Rule”) enhancing disclosure requirements for registered companies covering cybersecurity risk and management. The Cybersecurity Final Rule requires registrants to disclose material cybersecurity incidents on Form 8-K within four business days of a determination that a cybersecurity incident is material, and such materiality determination must be made without unreasonable delay.

The rule also requires periodic disclosures of, among other things, details on the company’s processes to assess, identify, and manage cybersecurity risks, cybersecurity governance, and management’s role in overseeing such a compliance program, including the board of directors’ oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule became effective in December 2023.

The Company has never had a material cyber security incident but will follow the Cybersecurity Final Rule regarding timely disclosure of a material cyber security incident. The Company has also disclosed its strategy and governance with respect to its cybersecurity risk management program in this December 31, 2024 Form 10-K.

Recent Accounting Pronouncements

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued updated guidance (Accounting Standards Update 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. This update improves the timeliness of recognizing changes in the liability for future policy benefits, modifies the rate used to discount future cash flows, simplifies and improves accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplifies the amortization of deferred acquisitions costs and expands required disclosures. The expanded disclosure requires 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 updated guidance was effective for reporting periods beginning after December 15, 2020. As a Smaller Reporting Company, the effective date has been changed twice and the delayed effective date is now for reporting periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted but not likely to be elected by the Company. With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, an insurance entity may elect to apply the amendments retrospectively as of the beginning of the earliest period presented. With respect to the market risk benefits, an insurance entity should apply the amendments retrospectively as of the beginning of the earliest period presented. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.

Transition for Sold Contracts

In December 2022, the FASB issued amendments (Accounting Standards Update 2022-5) to Accounting Standards Update 2018-12 (Targeted Improvements for Long-Duration Contracts) that originally required an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application was elected. This updated guidance reduces implementation costs and complexity associated with the adoption of targeted improvements in accounting for long-duration contracts that have been derecognized in accordance with Accounting Standards Update 2018-12 before the delayed effective date. Without the amendments in this Update, an insurance entity would be required to reclassify a portion of gains or losses previously recognized in the sale or disposal of insurance contracts or legal entities because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, this reclassification may not be useful to users of financial information.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted but not likely to be elected by the Company. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued amendments (Accounting Standards Update 2023-07) to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The amendments require public entities to follow the significant expense principle and disclose on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) with additional disclosure of the CODM’s title, position and how the reported measure(s) of segment profit or loss are used in assessing segment performance and allocating resources. In addition, amounts for other segment items are required to be disclosed including a description of its composition. If the COMD uses more than one measure in assessing segment performance and allocating resources, at least one of the measures should be consistent with the corresponding amounts utilized in the public entity’s consolidated financial statements.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company anticipates adopting and disclosing this Update for year-end reporting in 2024 and for interim periods beginning in 2025.

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 require 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 is 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 is required to provide an explanation of the individual reconciling items such as the nature, effect and causes of the reconciling items.

The amendments in this guidance are effective for public companies for fiscal years beginning after December 15, 2024~~, and interim periods within fiscal years beginning after December 15, 2024~~. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2025.

~~Cybersecurity~~Expense ~~Risk~~Disaggregation ~~Management, Strategy, Governance and Incident~~ Disclosures ~~by Public Companies~~

OnIn ~~July~~November 262024, ~~2023,~~ the ~~U.S.~~FASB ~~Securities~~issued ~~and~~amendments ~~Exchange Commission adopted this Final Rule~~ (~~the~~Accounting ~~“Cybersecurity~~Standards ~~Final~~Update ~~Rule”~~2024-03) ~~enhancing~~to ~~disclosure~~disclose ~~requirements~~more ~~for~~granular ~~registered~~information ~~companies~~about ~~covering~~costs ~~cybersecurity~~of ~~risk~~sales and ~~management.~~general ~~The~~and ~~Cybersecurity~~administrative ~~Final~~expenses ~~Rule~~including ~~requires~~employee ~~registrants~~compensation to ~~disclose~~improve ~~material~~the ~~cybersecurity~~disclosure ~~incidents~~about ona ~~Form~~public ~~8-K~~enterprise’s ~~within~~expenses ~~four~~by ~~business~~providing ~~days~~more ofdetailed ainformation ~~determination~~about ~~that~~the atypes ~~cybersecurity~~of ~~incident~~expenses iscommonly ~~material,~~presented ~~and~~in expense captions such ~~materiality~~as ~~determination~~costs ~~must~~of besales ~~made~~and ~~without~~general ~~unreasonable~~and ~~delay~~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.

~~The~~Debt ~~rule~~With ~~also~~Conversion ~~requires periodic disclosures of, among other things, details on the company’s processes to assess, identify,~~ and ~~manage~~Other cybersecurity risks, cybersecurity governance, and management’s role in overseeing such a compliance program, including the board of directors’ oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule become effective as early as December 2023.Options

~~The~~In ~~Company~~November ~~has~~2024, ~~not~~the ~~ever~~FASB ~~had~~issued aamendments ~~material~~(Accounting ~~cyber~~Standards ~~security~~Update ~~incident~~2024-04) ~~but~~to ~~will~~clarify ~~follow~~ the ~~Cybersecurity~~requirements ~~Final~~for ~~Rule~~determining ~~regarding~~whether ~~timely~~certain ~~disclosure~~settlements of aconvertible ~~material~~debt ~~cyber~~instruments ~~security~~should ~~incident~~be accounted as an induced conversion. Under ~~The~~this ~~Company~~Update, ~~has~~an ~~also~~inducement ~~disclosed~~offer ~~its~~is ~~strategy~~required ~~and~~to ~~governance~~provide the debt holder with, ~~respect~~at toa ~~its~~minimum, ~~cybersecurity~~the ~~risk~~consideration ~~management~~in ~~program~~form and amount issuable under the conversion privileges provided in ~~this~~the ~~December~~instrument. If 31the convertible debt instrument has been exchanged, ~~2023~~modified ~~Form~~or 10deemed not substantially different within the one-Kyear period before the settlement date, the current inducement offer should be compared to the inducement offer that existed one-year before the settlement date.

In addition, the incorporation, elimination or modification of a volume weighted average price formula does not automatically cause a settlement to be accounted for as an extinguishment; there is instead a need to assess whether the form and amount of the conversion consideration is preserves using the fair value of the shares as of the settlement date. This induced conversion guidance applies to convertible debt instruments that are not currently convertible as long as there was a substantive conversion feature as of its issuance date or settlement date.

The amendments to this Update are effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within that annual reporting period. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company does not have or anticipate having any debt instruments and anticipates never being required to adopt the information required by this Update.

FINANCIAL HIGHLIGHTS

Consolidated Condensed Results of Operations for the Years Ended December 31, ~~2023~~2024 and ~~2022~~2023

	Years Ended December 31,						Amount Change
	2023			2022			2023 less 2022
	2024			2023			2024 less 2023
Premiums	$	3841,~~912~~878,~~934~~896		$	3538,~~705~~912,~~560~~934		$	32,~~207~~965,~~374~~962
Net investment income		3130,~~655~~522,~~321~~580			2631,~~221~~655,~~172~~321			5(1,~~434~~132,~~149~~741	)
Net realized investment gains (losses)		~~(180~~264,~~152~~821	)		~~544~~(180,~~217~~152	)		~~(724~~444,~~369~~973	)
Service fees		4,701,960			3,004,324			1,697,636
Loss on impairments		(129,436	)		-			(129,436	)
Other income		666,409			83,826			582,583
Service fees		3,161,535			4,701,960			(1,540,425	)
Total revenues		75,756,472			65,559,099			10,197,373
Other income		652,793			666,409			(13,616	)
Benefits and claims		46,141,488			41,171,820			4,969,668
Total revenues		76,351,189			75,756,472			594,717
Expenses		19,552,536			16,416,627			3,135,909
Benefits and claims		46,482,298			46,141,488			340,810
Total benefits, claims and expenses		65,694,024			57,588,447			8,105,577
Expenses		21,792,600			19,552,536			2,240,064
Income before federal income tax expense		10,062,448			7,970,652			2,091,796
Total benefits, claims and expenses		68,274,898			65,694,024			2,580,874
Federal income tax expense		2,147,087			1,785,949			361,138
Income before federal income tax expense		8,076,291			10,062,448			(1,986,157	)
Net income	$	7,915,361		$	6,184,703		$	1,730,658
Federal income tax expense		1,659,500			2,147,087			(487,587	)
Net income	$	6,416,791		$	7,915,361		$	(1,498,570	)
Net income per common share
Class A common stock	$	0.~~8358~~6776		$	0.~~6531~~8358		$	(0.~~1827~~1582	)
Class B common stock	$	0.~~7104~~5759		$	0.~~5551~~7104		$	(0.~~1553~~1345	)

Consolidated Condensed Financial Position as of December 31, 2023 and 2022

					Amount Change
	December 31, 2023		December 31, 2022		2023 less 2022
Investment assets	$	456,517,640	$	442,069,335	$	14,448,305
Assets held in trust under coinsurance agreement		79,940,459		92,033,769		(12,093,310	)
Other assets		135,563,436		131,760,933		3,802,503
Total assets	$	672,021,535	$	665,864,037	$	6,157,498
Policy liabilities	$	517,637,743	$	504,059,423	$	13,578,320
Funds withheld under coinsurance agreement		77,257,253		92,301,039		(15,043,786	)
Deferred federal income taxes		4,228,189		2,677,411		1,550,778
Other liabilities		8,882,142		15,173,652		(6,291,510	)
Total liabilities		608,005,327		614,211,525		(6,206,198	)
Shareholders' equity		64,016,208		51,652,512		12,363,696
Total liabilities and shareholders' equity	$	672,021,535	$	665,864,037	$	6,157,498
Shareholders' equity per common share
Class A common stock	$	6.7597	$	5.4542	$	1.3055
Class B common stock	$	5.7457	$	4.6360	$	1.1097

~~Results~~Consolidated ofCondensed ~~Operations~~Financial –Position ~~Years~~as ~~Ended~~of December 31, ~~2023~~2024 and ~~2022~~2023

					Amount Change
	December 31, 2024		December 31, 2023		2024 less 2023


Investment assets	$	493,388,984	$	456,517,640	$	36,871,344
Assets held in trust under coinsurance agreement		31,176,310		79,940,459		(48,764,149	)
Other assets		161,883,604		135,563,436		26,320,168
Total assets	$	686,448,898	$	672,021,535	$	14,427,363

Policy liabilities	$	571,922,942	$	517,637,743	$	54,285,199
Funds withheld under coinsurance agreement		31,032,174		77,257,253		(46,225,079	)
Deferred federal income taxes		4,023,492		4,228,189		(204,697	)
Other liabilities		10,420,062		8,882,142		1,537,920
Total liabilities		617,398,670		608,005,327		9,393,343
Shareholders' equity		69,050,228		64,016,208		5,034,020
Total liabilities and shareholders' equity	$	686,448,898	$	672,021,535	$	14,427,363

Shareholders' equity per common share
Class A common stock	$	7.2913	$	6.7597	$	0.5316
Class B common stock	$	6.1976	$	5.7457	$	0.4519

Results of Operations – Years Ended December 31, 2024 and 2023

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 years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2023			2022			2023 less 2022
	2024			2023			2024 less 2023
Premiums	$	3841,~~912~~878,~~934~~896		$	3538,~~705~~912,~~560~~934		$	32,~~207~~965,~~374~~962
Net investment income		3130,~~655~~522,~~321~~580			2631,~~221~~655,~~172~~321			5(1,~~434~~132,~~149~~741	)
Net realized investment gains (losses)		~~(180~~264,~~152~~821	)		~~544~~(180,~~217~~152	)		~~(724~~444,~~369~~973	)
Service fees		4,701,960			3,004,324			1,697,636
Loss on impairments		(129,436	)		-			(129,436	)
Other income		666,409			83,826			582,583
Service fees		3,161,535			4,701,960			(1,540,425	)
Total revenues	$	75,756,472		$	65,559,099		$	10,197,373
Other income		652,793			666,409			(13,616	)
Total revenues	$	76,351,189		$	75,756,472		$	594,717

The $10594,~~197,373~~717 increase in total revenues for the year ended December 31, ~~2023~~2024 is discussed below.

Premiums

Our premiums for the years ended December 31, 2023 and 2022 are summarized as follows:

	Years Ended December 31,				Amount Change
	2023		2022		2023 less 2022
Ordinary life first year	$	3,074,078	$	2,654,456	$	419,622
Ordinary life renewal		7,130,477		4,958,248		2,172,229
Final expense first year		3,498,043		4,314,119		(816,076	)
Final expense renewal		25,210,336		23,778,737		1,431,599
Total premiums	$	38,912,934	$	35,705,560	$	3,207,374

The $3,207,374 increase in premiums for the year ended December 31, 2023 is primarily due to the $2,172,229 increase in ordinary life renewal premiums, $1,431,599 increase in final expense renewal premiums and $419,622 increase in ordinary life first year premiums that exceeded a $816,076 decrease in final expense first year premiums.

The increase in ordinary life first year and renewal premiums primarily reflects ordinary dollar denominated life insurance policies sold in the international market by TAI. The increase in final expense renewal premiums reflects the persistency of prior years’ final expense production. The decrease in final expense first year premiums reflects our tighter underwriting guidelines compared to competitors.

Premiums

Our premiums for the years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,				Amount Change
	2024		2023		2024 less 2023
Ordinary life first year	$	3,742,607	$	3,074,078	$	668,529
Ordinary life renewal		8,874,166		7,130,477		1,743,689
Final expense first year		3,423,413		3,498,043		(74,630	)
Final expense renewal		25,838,710		25,210,336		628,374
Total premiums	$	41,878,896	$	38,912,934	$	2,965,962

The $2,965,962 increase in premiums for the year ended December 31, 2024 is primarily due to the $1,743,689 increase in ordinary life renewal premiums, $668,529 increase in ordinary life first year premiums and $628,374 increase in final expense renewal premiums that exceeded a $74,630 decrease in final expense first year premiums.

The increase in ordinary life renewal premiums and ordinary life first year premiums primarily reflects ordinary dollar denominated life insurance policies sold in the international market by TAI. The increase in final expense renewal premiums reflects the persistency of prior years’ final expense production. The decrease in final expense first year premiums reflects changes in competitor underwriting guidelines that are relaxed compared to our restricted underwriting standards.

Net Investment Income

The major components of our net investment income for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Years Ended December 31,

Amount Change

2023

2022

2023 less 2022

2024

2023

2024 less 2023

Fixed maturity securities

68,~~550~~534,~~360~~951

76,~~061~~550,~~501~~360

~~(511~~1,~~141~~984,591

)

Equity securities

~~118~~135,~~780~~911

~~211~~118,~~290~~780

~~(92~~17,~~510~~131

)

Other long-term investments

4,~~948~~444,~~734~~639

4,~~975~~948,~~205~~734

(26504,~~471~~095

)

Mortgage loans

1917,~~678~~079,~~014~~731

1619,~~850~~678,~~320~~014

(2,~~827~~598,~~694~~283

)

Policy loans

~~240~~291,~~385~~170

~~194~~240,~~814~~385

4550,~~571~~785

Short-term and other investments

2,~~600~~531,~~099~~767

~~243~~2,~~315~~600,099

2(68,~~356,784~~332

)

Gross investment income

3433,~~136~~018,~~372~~169

2934,~~536~~136,~~445~~372

4(1,~~599~~118,~~927~~203

)

Investment expenses

(2,~~481~~495,~~051~~589

)

(32,~~315~~481,~~273~~051

)

~~(834~~14,~~222~~538

)

Net investment income

3130,~~655~~522,~~321~~580

2631,~~221~~655,~~172~~321

5(1,~~434~~132,~~149~~741

)

The $41,~~599~~118,~~927~~203 ~~increase~~decrease in gross investment income for the year ended December 31, ~~2023~~2024 is primarily due to $2,~~827~~598,~~694~~283 ~~increase~~decrease in mortgage loans and a $2504,~~356,784~~095 ~~increase~~decrease in ~~short~~other long-term ~~and other~~ investments that exceeded a $~~511~~1,~~141~~984,591 ~~decrease~~increase in fixed maturity securities.

The ~~increase~~decrease in mortgage loans ~~gross~~ investment income is primarily due to andecreased ~~increase in average~~ mortgage loans ~~balance~~investments of $3130.25 million ~~comparing~~since ~~the years ended~~ December 31, 2023 ~~to 2022~~. The ~~increase~~decrease in ~~short~~other long-term ~~and other investments gross~~ investment ~~income~~ is primarily due to ~~efficiently~~decreased ~~investing~~other ~~available~~long-term ~~cash~~investment atof ~~higher~~$3.3 ~~yields~~million onsince ~~securities~~December ~~held~~31, ~~in the portfolio and other investments~~2023. The ~~decline~~increase in fixed maturity securities investment income is primarily due to aincreased ~~decrease in the average~~ fixed maturity securities ~~holdings~~investments of $1764.20 million ~~comparing~~since ~~the years ended~~ December 31, 2023 ~~to 2022~~.

The $834,222 decrease in investment expense for the year ended December 31, 2023 is primarily due to the reallocation of mortgage loan cost to operations for brokering mortgage loans to third parties and a decrease in fixed maturity securities acquisition expenses.

Net Realized Investment Gains (Losses)

Our net realized investment gains (losses) result from sales of fixed maturity securities available-for-sale, equity securities, mortgage loans on real estate, ~~investment real estate, equity securities,~~ other long-term investments, investment real estate, changes in ~~the~~ fair value of equity securities and changes in ~~current~~ estimate of credit losses.

Our net realized investment gains (losses) for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2023			2022			2023 less 2022
	2024			2023			2024 less 2023
Fixed maturity securities available-for-sale:
Sale proceeds and maturities	$	515,~~287~~179,~~601~~021		$	585,~~393~~287,~~624~~601		$	~~(53~~9,~~106~~891,~~023~~420	)
Amortized cost at sale date		515,~~339~~278,~~617~~204			575,~~531~~339,~~842~~617			~~(52~~9,~~192~~938,~~225~~587	)
Net realized gains (losses)	$	(52,016	)	$	861,782		$	(913,798	)
Net realized losses	$	(99,183	)	$	(52,016	)	$	(47,167	)
Mortgage loans on real estate:
Sale proceeds	$	132,634,814		$	118,132,864		$	14,501,950
Cost at sale date		132,632,318			118,132,864			14,499,454
Net realized gains	$	2,496		$	-		$	2,496
Investment real estate:
Sale proceeds	$	-		$	200,080		$	(200,080	)
Carrying value at sale date		-			147,909			(147,909	)
Net realized gains	$	-		$	52,171		$	(52,171	)
Equity securities at fair value:
Sale proceeds	$	-5		$	-		$	-5
Cost at sale date		-9			~~8,000~~-			~~(8,000~~9	)
Net realized losses	$	-(4	)	$	~~(8,000~~-	)	$	~~8,000~~(4	)
Mortgage loans on real estate:
Payment and sale proceeds on mortgage loans	$	173,048,603		$	132,634,814		$	40,413,789
Cost at sale date		172,348,722			132,632,318			39,716,404
Net realized gains	$	699,881		$	2,496		$	697,385
Other long-term investments:
Sale proceeds	$	-		$	16,308,664		$	(16,308,664	)
Sales proceeds	$	17,288,490		$	-		$	17,288,490
Carrying value at sale date		-			16,731,242			(16,731,242	)
Cost at sale date		17,242,840			-			17,242,840
Net realized losses	$	-		$	(422,578	)	$	422,578
Net realized gains	$	45,650		$	-		$	45,650
Equity securities, changes in fair value	$	8,653		$	60,842		$	(52,189	)
Investment real estate:
Changes in current estimate of credit losses	$	(139,285	)	$	-		$	(139,285	)
Sale proceeds	$	276,956		$	-		$	276,956
Net realized investment gains (losses)	$	(180,152	)	$	544,217		$	(724,369	)
Carrying value at sale date		265,705			-			265,705
Net realized gains	$	11,251		$	-		$	11,251
Equity securities, changes in fair value	$	(97,284	)	$	8,653		$	(105,937	)
Changes in current estimate of credit losses	$	(295,490	)	$	(139,285	)	$	(156,205	)
Net realized investment gains (losses)	$	264,821		$	(180,152	)	$	444,973

Loss on Impairments

During 2024, management impaired TLIC’s three acres of undeveloped land located in Topeka, Kansas by $129,436 from its carrying value to its net realizable value expected at the time of ultimate resale based on a third party appraisal.

Service Fees

The $1,~~697~~540,~~636~~425 ~~increase~~decrease in service fees for the year ended December 31, ~~2023~~2024 is primarily due to ~~brokerage~~a decrease in fees ~~earned~~from onTrinity ~~selling~~Mortgage Corporation brokering mortgage loans tofor a fee to third ~~party~~parties.

Other Income

The $582,583 increase in other income for the year ended December 31, 2023 is primarily due to interest on collateralized loans to an investment vendor.

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 years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Years Ended December 31,

Amount Change

2023

2022

2023 less 2022

2024

2023

2024 less 2023

Benefits and claims

Increase in future policy benefits

14,~~212~~565,~~615~~010

1314,~~713~~212,~~452~~615

~~499~~352,~~163~~395

Death benefits

1413,~~298~~176,~~818~~508

1214,~~998~~298,~~679~~818

(1,~~300~~122,~~139~~310

)

Surrenders

2,~~173~~471,~~694~~376

12,~~414~~173,~~622~~694

~~759~~297,~~072~~682

Interest credited to policyholders

15,~~093~~880,~~685~~681

1215,~~714~~093,~~469~~685

2786,~~379,216~~996

Dividend, endowment and supplementary life contract benefits

~~362~~388,~~676~~723

~~330~~362,~~598~~676

3226,~~078~~047

Total benefits and claims

46,~~141~~482,~~488~~298

4146,~~171~~141,~~820~~488

4340,~~969,668~~810

Expenses

Policy acquisition costs deferred

(1316,~~476~~620,~~834~~462

)

(13,~~734~~476,~~859~~834

)

~~258~~(3,~~025~~143,628

)

Amortization of deferred policy acquisition costs

810,~~863~~775,~~514~~374

78,~~280~~863,~~457~~514

1,~~583~~911,~~057~~860

Amortization of value of insurance business acquired

~~270~~183,~~752~~913

270,~~394~~752

~~358~~(86,839

)

Commissions

1216,~~803~~030,~~764~~481

12,~~776~~803,~~046~~764

273,~~718~~226,717

Other underwriting, insurance and acquisition expenses

11,~~091~~423,~~340~~294

911,~~824~~091,~~589~~340

1331,~~266,751~~954

Total expenses

1921,~~552~~792,~~536~~600

1619,~~416~~552,~~627~~536

32,~~135~~240,~~909~~064

Total benefits, claims and expenses

6568,~~694~~274,~~024~~898

5765,~~588~~694,~~447~~024

82,~~105~~580,~~577~~874

The $82,~~105~~580,~~577~~874 increase in total benefits, claims and expenses for the year ended December 31, ~~2023~~2024 is discussed below.

Benefits and Claims

The $4340,~~969,668~~810 increase in total benefits and claims for the year ended December 31, ~~2023~~2024 is primarily due to the following:

● $2786,~~379,216~~996 increase in interest credited to policyholders is primarily due to an increase in the crediting rate on new annuity contracts issued during ~~2023~~2024 compared to annuity contracts surrendered during ~~2023~~2024.

● $1352,~~300,139~~395 increase in ~~death~~future policy benefits is primarily due to ~~approximately~~the ~~$759,000~~increased number of ~~increased~~life ~~ordinary~~policies ~~life~~in ~~benefits~~force and ~~$540,000~~the aging of ~~increased~~existing ~~final~~life ~~expense benefits~~policies.

● $~~759~~297,~~072~~682 increase in surrenders is based upon policyholder election.

● $~~499~~1,~~163~~122,310 ~~increase~~decrease in ~~future~~death ~~policy~~ benefits is primarily due to ~~the~~approximately ~~increased~~$658,000 ~~number~~ of ~~life~~decreased ~~policies~~ordinary inlife ~~force~~benefits and ~~the~~$464,000 ~~aging~~ of ~~existing~~decreased ~~life~~final ~~policies~~expense benefits.

Deferral and Amortization of Deferred Acquisition Costs

Certain costs related to the successful acquisition of traditional life insurance policies are capitalized and amortized over the premium-paying period of the policies. Certain costs related to the successful acquisition of insurance and annuity policies that subject us to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are capitalized and amortized in relation to the present value of actual and expected gross profits on the policies.

These acquisition costs, which are referred to as deferred policy acquisition costs, include commissions and other successful costs of acquiring policies and contracts, which vary with, and are primarily related to, the successful production of new and renewal insurance and annuity contracts.

For the years ended December 31, ~~2023~~2024 and ~~2022~~2023, capitalized costs were $1316,~~476~~620,~~834~~462 and $13,~~734~~476,~~859~~834, respectively. Amortization of deferred policy acquisition costs for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 were $810,~~863~~775,~~514~~374 and $78,~~280~~863,~~457~~514.

The $~~258~~3,~~025~~143,628 increase in the ~~2023~~2024 acquisition costs deferred primarily relates to ~~slightly~~ increased ~~ordinary~~annuity ~~life~~production ~~first~~with ~~year~~a ~~and~~corresponding ~~annuity~~increase ~~production~~in ~~and~~ deferral of ~~slightly increased~~ eligible ~~commissions~~annuity ~~and expenses~~commissions. There was ana $1,~~583~~911,~~057~~860 increase in the ~~2023~~2024 amortization of deferred acquisition costs primarily due to ~~2023~~2024 annuity surrenders and withdrawal activity ~~and the impact of increased mortality~~.

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 $~~270~~183,~~752~~913 and $270,~~394~~752 for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively.

Commissions

Our commissions for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Years Ended December 31,

Amount Change

2023

2022

2023 less 2022

2024

2023

2024 less 2023

Annuity

24,~~204~~637,~~946~~570

2,~~099~~204,~~439~~946

~~105~~2,~~507~~432,624

Ordinary life first year

3,~~224~~977,~~247~~122

23,~~760~~224,~~258~~247

~~463~~752,~~989~~875

Ordinary life renewal

~~750~~999,~~566~~372

~~440~~750,~~973~~566

~~309~~248,~~593~~806

Final expense first year

4,~~245~~033,~~077~~281

54,~~180~~245,~~713~~077

(~~935~~211,~~636~~796

)

Final expense renewal

2,~~378~~383,~~928~~136

2,~~294~~378,~~663~~928

844,~~265~~208

Total commissions

1216,~~803~~030,~~764~~481

12,~~776~~803,~~046~~764

273,~~718~~226,717

The $273,~~718~~226,717 increase in commissions for the year ended December 31, ~~2023~~2024 is primarily due to a $~~463~~2,~~989~~432,624 increase inannuity ~~ordinary life first year~~ commissions (corresponding to $~~419~~71,~~622~~630,897 of increased ~~ordinary~~annuity ~~life~~deposits ~~first~~retained) ~~year~~and ~~premiums),~~a $~~309~~752,~~593~~875 increase in ordinary life ~~renewal~~first year commissions (corresponding to $2668,~~172,229~~529 increased ordinary life ~~renewal~~first year premiums) and a $~~105~~248,~~507~~806 increase ~~annuity commissions (corresponding to $2,283,991 of increased annuity deposits retained) that exceed a $935,636 decrease~~ in ~~final~~ordinary ~~expense~~life ~~first~~renewal ~~year~~ commissions (corresponding to $~~816~~1,~~076~~743,689 ~~decreased~~increased ~~final~~ordinary ~~expense~~life ~~first~~renewal ~~year~~ premiums).

Other Underwriting, Insurance and Acquisition Expenses

The $1331,~~266,751~~954 increase in other underwriting, insurance and acquisition expenses for the year ended December 31, ~~2023~~2024 was primarily related to an increase in ~~salaries~~guaranty ~~and~~fund ~~benefits,~~assessment fees and third party administrative fees~~, advisor fees and legal fees~~.

Federal Income Taxes

FTFC files a 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 years ended December 31, ~~2023~~2024 and ~~2022~~2023, current income tax expense was $1,~~778~~496,~~778~~626 and $~~758~~1,~~465~~778,778, respectively. Deferred federal income tax expense was $~~368~~162,~~309~~874 and $1368,~~027,484~~309 for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively.

Net Income Per Common Share Basic

For the year ended December 31, ~~2023~~2024 and ~~2022~~2023, 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 year ended December 31, ~~2023~~2024, the net income allocated to the Class A shareholders of $76,~~843~~358,~~534~~563 is the total net income $76,~~915~~416,~~361~~791 less the net income allocated to the Class B shareholders $7158,~~827~~228. For the year ended December 31, ~~2022~~2023, the net income allocated to the Class A shareholders of $67,~~128~~843,~~581~~534 is the total net income $67,~~184~~915,~~703~~361 less the net income allocated to the Class B shareholders $5671,~~122~~827.

The weighted average outstanding common shares basic for the year ended December 31, ~~2023~~2024 and ~~2022~~2023 were 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 years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Years Ended December 31,

Amount Change

2023

2022

2023 less 2022

2024

2023

2024 less 2023

Revenues:

Life insurance operations

4649,~~859~~727,~~649~~760

4146,~~826~~859,~~391~~649

52,~~033~~868,~~258~~111

Annuity operations

24,~~531~~102,~~347~~511

2124,~~351~~531,~~816~~347

3(428,~~179,531~~836

)

Corporate operations

42,~~365~~520,~~476~~918

24,~~380~~365,~~892~~476

(1,~~984~~844,~~584~~558

)

Total

7576,~~756~~351,~~472~~189

6575,~~559~~756,~~099~~472

10594,~~197,373~~717

Income before federal income taxes:

Life insurance operations

35,~~463~~897,~~203~~565

3,~~139~~463,~~886~~203

~~323~~2,~~317~~434,362

Annuity operations

3945,~~453,174~~053

3,~~028~~453,~~852~~174

~~424~~(2,~~322~~508,121

)

Corporate operations

31,~~146~~233,~~071~~673

13,~~801~~146,~~914~~071

(1,~~344~~912,~~157~~398

)

Total

108,~~062~~076,~~448~~291

710,~~970~~062,~~652~~448

2(1,~~091~~986,~~796~~157

)

The increases and decreases of revenues and profitability from our business segments for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	32,~~207~~965,~~374~~962		$	-		$	-		$	32,~~207~~965,~~374~~962
Net invesment income		1(337,~~841,394~~189	)		3(1,~~475~~135,~~889~~787	)		~~116~~340,~~866~~235			5(1,~~434~~132,~~149~~741	)
Net realized investment gains (losses)		(157,161	)		(575,208	)		8,000			(724,369	)
Net realized investment gains less impairments		80,881			234,656			-			315,537
Service fees and other income		~~141~~158,~~651~~457			~~278~~472,~~850~~295			1(2,~~859~~184,~~718~~793	)		2(1,~~280~~554,~~219~~041	)
Total revenue		52,~~033~~868,~~258~~111			3(428,~~179,531~~836	)		(1,~~984~~844,~~584~~558	)		10594,~~197,373~~717
Benefits and claims
Increase in future policy benefits		~~499~~352,~~163~~395			-			-			~~499~~352,~~163~~395
Death benefits		(1,~~300~~122,~~139~~310	)		-			-			(1,~~300~~122,~~139~~310	)
Surrenders		~~759~~297,~~072~~682			-			-			~~759~~297,~~072~~682
Interest credited to policyholders		-			2786,~~379,216~~996			-			2786,~~379,216~~996
Dividend, endowment and supplementary life contract benefits		3226,~~078~~047			-			-			3226,~~078~~047
Total benefits and claims		2(446,~~590,452~~186	)		2786,~~379,216~~996			-			4340,~~969,668~~810
Expenses
Policy acquisition costs deferred net of amortization		1135,~~794,256~~701			46(1,~~826~~367,469	)		-			(1,~~841~~231,~~082~~768	)
Amortization of value of insurance business acquired		~~179~~(43,420	)		~~179~~(43,419	)		-			~~358~~(86,839	)
Commissions		~~(77~~794,~~789~~093	)		~~105~~2,~~507~~432,624			-			273,~~718~~226,717
Other underwriting, insurance and acquisition expenses		~~402~~(6,~~843~~439	)		~~223~~270,~~481~~553			~~640~~67,~~427~~840			1331,~~266,751~~954
Total expenses		2879,~~119,489~~935			~~375~~1,~~993~~292,289			~~640~~67,~~427~~840			32,~~135~~240,~~909~~064
Total benefits, claims and expenses		4433,~~709,941~~749			2,~~755~~079,~~209~~285			~~640~~67,~~427~~840			82,~~105~~580,~~577~~874
Income before federal income taxe expense	$	323,317		$	424,322		$	1,344,157		$	2,091,796
Income (loss) before federal income tax expense (benefit)	$	2,434,362		$	(2,508,121	)	$	(1,912,398	)	$	(1,986,157	)

Consolidated Financial Condition

Our invested assets as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Amount Change

December 31, 2023

December 31, 2022

2023 less 2022

December 31, 2024

December 31, 2023

2024 less 2023

Assets

Investments

Available-for-sale fixed maturity securities at fair value (amortized cost: $161,908,230 and $144,744,158 as of December 31, 2023 and 2022, respectively)

149,700,948

126,612,890

23,088,058

Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)

213,745,821

149,700,948

64,044,873

Equity securities at fair value (cost: $287,375 and $276,131 as of December 31, 2023 and 2022, respectively)

419,530

399,633

19,897

Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)

5,336,062

419,530

4,916,532

Mortgage loans on real estate

~~239~~209,~~831~~364,~~447~~504

~~242~~239,~~314~~831,~~128~~447

(230,~~482~~466,~~681~~943

)

Investment real estate

12,~~305~~351,~~403~~549

~~540~~1,~~436~~305,403

~~764~~1,~~967~~046,146

Policy loans

34,~~474~~367,~~116~~534

23,~~840~~474,~~887~~116

~~633~~893,~~229~~418

Short-term investments

~~298,257~~-

1298,~~860,578~~257

(1298,~~562,321~~257

)

Other long-term investments

6158,~~487~~223,~~939~~514

6761,~~500~~487,~~783~~939

(63,~~012~~264,~~844~~425

)

Total investments

~~456~~493,~~517~~388,~~640~~984

~~442~~456,~~069~~517,~~335~~640

1436,~~448~~871,~~305~~344

The increase ~~and decrease~~ in fixed maturity available-for-sale securities for the years ended December 31, ~~2023~~2024 and ~~2022,~~2023 ~~respectively,~~ are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Fixed maturity securities, available-for-sale, beginning	$	~~126~~149,~~612~~700,~~890~~948		$	~~184~~126,~~077~~612,~~038~~890
Purchases		2381,~~059~~180,~~491~~014			3523,~~249~~059,~~421~~491
Unrealized appreciation (depreciation)		5(1,~~632~~750,~~801~~599	)		~~(34~~5,~~851~~632,~~942~~801	)
Net realized investment losses (gains)		(191,301	)		861,782
Net realized investment losses		(394,673	)		(191,301	)
Sales proceeds		(~~457~~11,~~601~~744,021	)		(57457,~~441,624~~601	)
Maturities		(43,~~830~~435,000	)		(~~952~~4,830,000	)
Premium amortization		(125,332	)		(329,785	)
Accretion of discounts (premium amortization)		189,152			(125,332	)
Increase (decrease)		23,088,058			(57,464,148	)
Increase		64,044,873			23,088,058
Fixed maturity securities, available-for-sale, ending	$	~~149~~213,~~700~~745,~~948~~821		$	~~126~~149,~~612~~700,~~890~~948

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 loss. The available-for-sale fixed maturity securities portfolio is invested in 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 ~~and certificate of deposits~~.

The increase in equity securities available-for-sale for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Equity securities, available-for-sale, beginning	$	~~399~~419,~~633~~530		$	~~348~~399,~~218~~633
Purchases		~~130~~5,~~550~~129,196			~~215~~130,~~470~~550
Joint venture distribution		(119,306	)		(216,897	)
Sales proceeds		(5	)		-
Net realized investment loss, sale of securities		-			(8,000	)
Joint venture distribution		(115,371	)		(119,306	)
Net realized investment gains, changes in fair value		8,653			60,842
Net realized investment loss, sale of securities		(4	)		-
Increase		19,897			51,415
Net realized investment gains (losses), changes in fair value		(97,284	)		8,653
Equity securities, available-for-sale, ending	$	419,530		$	399,633
Increase		4,916,532			19,897
Equity securities, available-for-sale, ending	$	5,336,062		$	419,530

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 decrease ~~and increase~~ in mortgage loans on real estate for the years ended December 31, ~~2023~~2024 and ~~2022,~~2023 ~~respectively,~~ are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Mortgage loans on real estate, beginning	$	~~242~~239,~~314~~831,~~128~~447		$	~~177~~242,~~508~~314,~~051~~128
Purchases		~~130~~143,~~956~~991,~~402~~455			~~183~~130,~~102~~956,~~781~~402
Discount accretion		1,856			250,089
Accretion of discounts (premium amortization)		(796,526	)		1,856
Net realized investment gains		2699,~~496~~881			-2,496
Payments		(~~132~~173,~~634~~048,~~814~~603	)		(~~118,~~132,~~864~~634,814	)
Foreclosed - transferred to real estate		(~~764~~1,~~967~~441,287	)		-(764,967	)
Increase in allowance for bad debts		(43,654	)		(413,929	)
(Increase) decrese in allowance for bad debts		128,137			(43,654	)
Increase (decrease)		(2,482,681	)		64,806,077
Decrease		(30,466,943	)		(2,482,681	)
Mortgage loans on real estate, ending	$	~~239~~209,~~831~~364,~~447~~504		$	~~242~~239,~~314~~831,~~128~~447

The increase ~~and decrease~~ in investment real estate for the years ended December 31, ~~2023~~2024 and ~~2022,~~2023 ~~respectively,~~ are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Investment real estate, beginning	$	~~540~~1,~~436~~305,403		$	~~688~~540,~~345~~436
Real estate acquired through mortgage loan foreclosure		~~764~~1,~~967~~441,287			-764,967
Sales proceeds		-			(200,080	)
Net realized investment gains		11,251
Net realized investment gains		-			52,171
Sales proceeds		(276,956	)		-
Increase (decrease)		764,967			(147,909	)
Loss on impairments		(129,436	)		-
Investment real estate, ending	$	1,305,403		$	540,436
Increase		1,046,146			764,967
Investment real estate, ending	$	2,351,549		$	1,305,403

The decrease ~~and increase~~ in other long-term investments (comprised of lottery receivables and co-op loans) for the years ended December 31, ~~2023~~2024 and ~~2022,~~2023 ~~respectively,~~ are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Other long-term investments, beginning	$	6761,~~500~~487,~~783~~939		$	6567,~~929~~500,~~215~~783
Purchases		79,~~385~~470,~~062~~507			137,~~327~~385,~~014~~062
Discount accretion		4,~~948~~507,~~951~~908			4,~~975~~948,~~796~~951
Net realized investment losses		-			(422,578	)
Net realized investment gains		45,650			-
Payments		(1817,~~346~~288,~~857~~490	)		(1618,~~308~~346,~~664~~857	)
Increase (decrease)		(6,012,844	)		1,571,568
Decrease		(3,264,425	)		(6,012,844	)
Other long-term investments, ending	$	6158,~~487~~223,~~939~~514		$	6761,~~500~~487,~~783~~939

Our assets other than invested assets as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Amount Change

December 31, 2023

December 31, 2022

2023 less 2022

December 31, 2024

December 31, 2023

2024 less 2023

Cash and cash equivalents

3364,~~839~~344,~~741~~122

33,~~542~~839,~~725~~741

~~297~~30,~~016~~504,381

Accrued investment income

65,~~214~~746,~~459~~167

56,~~580~~214,~~175~~459

~~634~~(468,~~284~~292

)

Recoverable from reinsurers

109,~~353~~845,~~674~~838

1110,~~102~~353,~~875~~674

(~~749~~507,~~201~~836

)

Assets held in trust under coinsurance agreement

7931,~~940~~176,~~459~~310

9279,~~033~~940,~~769~~459

(1248,~~093~~764,~~310~~149

)

Agents' balances and due premiums

1,~~284~~393,~~003~~277

1,~~253~~284,~~077~~003

30109,~~926~~274

Deferred policy acquisition costs

6066,~~795~~640,~~108~~453

5660,~~183~~795,~~785~~108

45,~~611~~845,~~323~~345

Value of insurance business acquired

3,~~777~~593,~~353~~440

43,~~048~~777,~~105~~353

(~~270~~183,~~752~~913

)

Other assets

1910,~~299~~320,~~098~~307

2019,~~050~~299,~~191~~098

(~~751~~8,~~093~~978,791

)

Assets other than investment assets

~~215~~193,~~503~~059,~~895~~914

~~223~~215,~~794~~503,~~702~~895

(822,~~290~~443,~~807~~981

)

The $~~297~~30,~~016~~504,381 increase in cash and cash equivalents for the year ended December 31, ~~2023~~2024 and the corresponding ~~decrease~~increase of $8297,~~985,321~~016 for the year ended December 31, ~~2022~~2023 are summarized in the Company’s consolidated statements of cash flows.

The $1248,~~093~~764,~~310~~149 decrease in assets held in trust under the coinsurance agreement is due to a reduction in assets from the significant surrenders of annuity contracts 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 years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively, are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Balance, beginning of year	$	5660,~~183~~795,~~785~~108		$	4956,~~717~~183,~~323~~785
Capitalization of commissions, sales and issue expenses		1316,~~476~~620,~~834~~462			13,~~734~~476,~~859~~834
Amortization		(810,~~863~~775,~~514~~374	)		(78,~~280~~863,~~457~~514	)
Deferred acquisition costs allocated to investments		~~(1,997~~257	)		12(1,~~060~~997	)
Balance, end of year	$	6066,~~795~~640,~~108~~453		$	5660,~~183~~795,~~785~~108

Our other assets as of December 31, ~~2023~~2024 and December 31, ~~2022~~2023 are summarized as follows:

					Amount Change
	December 31, 2023		December 31, 2022		2023 less 2022
	December 31, 2024		December 31, 2023		2024 less 2023
Federal and state income taxes recoverable	$	104,~~845~~708,~~790~~718	$	810,~~887~~845,~~609~~790	$	1(6,~~958~~137,~~181~~072	)
Advances to mortgage loan originator		4,~~487~~746,~~715~~638		4,~~743~~487,~~041~~715		~~(255~~258,~~326~~923	)
Advances to an independently owned investment firm		2,045,191		5,000,000		(2,954,809	)
Accrued management fee		393,159		345,148		48,011
Guaranty funds		723,767		699,865		23,902
Lease asset - right to use		270,679		369,107		(98,428	)
Accrued management fee		345,148		-		345,148
Other receivables, prepaid assets and deposits		171,032		159,854		11,178
Lease asset - right to use		369,107		467,536		(98,429	)
Notes receivable		30,081		44,319		(14,238	)
Receivables from lottery vendor		~~278,207~~-		-278,207		(278,207	)
Other receivables, prepaid assets and deposits		159,854		194,737		(34,883	)
Guaranty funds		-		723,767		(723,767	)
Notes receivable		44,319		57,403		(13,084	)
Advances to an independently owned investment firm		-		2,045,191		(2,045,191	)
Total other assets	$	1910,~~299~~320,~~098~~307	$	2019,~~050~~299,~~191~~098	$	(~~751~~8,~~093~~978,791	)

There was a $16,~~958~~137,~~181~~072 ~~increase~~decrease in federal and state income taxes recoverable in 2024 primarily due to receiving a federal income tax refund of $8,087,076 for the tax years 2020, 2021 and 2022 that exceeded federal and state tax withholdings on lottery receivables.

There was a $345,148 increase in accrued management fees for managing mortgage loans for a third party.

There was a $~~278~~2,~~207~~045,191 ~~increase~~decrease in ~~receivables~~advances ~~from~~to an independently owned investment firm due to the full repayment of a ~~lottery~~promissory ~~vendor~~note.

There was a $~~255~~723,~~326~~767 decrease in ~~advances~~the guaranty fund primarily due to ~~one~~a ~~mortgage~~reduction ~~loan~~in ~~originator~~the ~~who~~premium ~~acquires~~tax ~~residential~~credit. ~~mortgage~~A ~~loans~~large ~~for~~portion ~~our~~of ~~life~~the ~~insurance~~guaranty ~~companies~~fund assessment was derived from annuity products, however most states do not assess premium taxes on annuity business.

There was a $2278,~~954,809~~207 decrease in ~~advances~~receivables tofrom ana ~~independently owned investment firm. The promissory note bears interest and is collateralized by structured settlement receivables,~~ lottery ~~receivables and annuity payment receivables~~vendor.

~~Our~~There ~~liabilities~~was asa of$258,923 ~~December~~increase ~~31,~~in ~~2023~~advances ~~and~~to ~~2022~~one ~~are~~mortgage ~~summarized~~loan asoriginator ~~follows:~~who acquires mortgage loans for our life companies.

					Amount Change
	December 31, 2023		December 31, 2022		2023 less 2022
Policy liabilities
Policyholders' account balances	$	391,247,676	$	391,359,944	$	(112,268	)
Future policy benefits		123,729,530		110,012,174		13,717,356
Policy claims		2,410,243		2,541,088		(130,845	)
Other policy liabilities		250,294		146,217		104,077
Total policy liabilities		517,637,743		504,059,423		13,578,320
Funds withheld under coinsurance agreement		77,257,253		92,301,039		(15,043,786	)
Deferred federal income taxes		4,228,189		2,677,411		1,550,778
Other liabilities		8,882,142		15,173,652		(6,291,510	)
Total liabilities	$	608,005,327	$	614,211,525	$	(6,206,198	)

Our liabilities as of December 31, 2024 and 2023 are summarized as follows:

The $13,717,356 increase in future policy benefits is primarily related to the production of new life insurance policies and the aging of existing policies an additional year.

					Amount Change
	December 31, 2024		December 31, 2023		2024 less 2023

Policy liabilities
Policyholders' account balances	$	431,190,092	$	391,247,676	$	39,942,416
Future policy benefits		138,027,832		123,729,530		14,298,302
Policy claims		2,478,465		2,410,243		68,222
Other policy liabilities		226,553		250,294		(23,741	)
Total policy liabilities		571,922,942		517,637,743		54,285,199
Funds withheld under coinsurance agreement		31,032,174		77,257,253		(46,225,079	)
Deferred federal income taxes		4,023,492		4,228,189		(204,697	)
Other liabilities		10,420,062		8,882,142		1,537,920
Total liabilities	$	617,398,670	$	608,005,327	$	9,393,343

The ~~decrease~~$14,298,302 ~~and~~ increase in ~~policyholders’~~future ~~account~~policy ~~balances~~benefits ~~for~~is primarily related to the ~~years~~production ~~ended~~of ~~December~~new ~~31,~~life ~~2023~~insurance policies and ~~2022,~~the ~~respectively,~~aging ~~are~~of ~~summarized~~existing aspolicies ~~follows:~~an additional year.

	Years Ended December 31,
	2023			2022
Policyholders' account balances, beginning	$	391,359,944		$	373,647,869
Deposits		69,082,635			67,308,368
Withdrawals		(104,579,076	)		(72,595,697	)
Funds withheld under coinsurance agreement		20,290,488			7,265,325
Acquisition of Royalty Capital Life Insurance Company		-			3,019,610
Interest credited		15,093,685			12,714,469
Increase (decrease)		(112,268	)		17,712,075
Policyholders' account balances, ending	$	391,247,676		$	391,359,944

The decrease and increase in policyholders’ account balances for the years ended December 31, 2024 and 2023, respectively, are summarized as follows:

The $1,550,778 increase in deferred federal income taxes was due to $1,182,469 of increased deferred federal income taxes on the unrealized appreciation of fixed maturity securities available-for-sale and $368,309 of operating deferred federal tax expense.

	Years Ended December 31,
	2024			2023
Policyholders' account balances, beginning	$	391,247,676		$	391,359,944
Deposits		141,387,484			69,082,635
Withdrawals		(166,419,069	)		(104,579,076	)
Funds withheld under coinsurance agreement		49,093,320			20,290,488
Interest credited		15,880,681			15,093,685
Increase (decrease)		39,942,416			(112,268	)
Policyholders' account balances, ending	$	431,190,092		$	391,247,676

The $15204,~~043,786~~697 decrease in ~~funds~~deferred ~~withheld~~federal ~~under~~income ~~coinsurance~~taxes ~~agreement~~was is due to ~~significant~~$367,571 ~~2023~~of ~~surrenders~~decreased ofdeferred ~~coinsured~~federal ~~annuity~~income ~~contracts~~taxes ~~under~~on ~~coinsurance~~the ~~agreement~~unrealized ~~with~~depreciation anof ~~offshore~~fixed ~~annuity~~maturity securities available-for-sale and ~~life~~$162,874 ~~insurance~~of ~~company~~operating deferred federal tax expense.

The $46,225,079 decrease in funds withheld under coinsurance agreement is due to significant 2024 surrenders of coinsured annuity contracts under coinsurance agreement with an offshore annuity and life insurance company.

Our other liabilities as of December 31, ~~2023~~2024 and December 31, ~~2022~~2023 are summarized as follows:

							Amount Change
	December 31, 2023			December 31, 2022			2023 less 2022
	December 31, 2024			December 31, 2023			2024 less 2023
Mortgage loans suspense	$	5,~~841~~910,~~113~~871		$	25,~~655~~841,~~185~~113		$	369,~~185,928~~758
Suspense accounts payable		~~800~~2,~~262~~695,069			9800,~~706,063~~262			(81,~~905~~894,~~801~~807	)
Guaranty fund assessments		713,000			681,000			32,000
Accrued expenses payable		611,000			696,000			(85,000	)
Accrued expenses payable		696,000			830,000			(134,000	)
Unclaimed funds		582,040			488,492			93,548
Unclaimed funds		488,492			338,204			150,288
Accounts payable		274,493			53,804			220,689
Lease liability		~~369~~270,~~107~~679			~~467~~369,~~536~~107			(98,~~429~~428	)
Unearned investment income		~~115~~148,~~166~~233			~~105~~115,~~236~~166			933,~~930~~067
Accounts payable		53,804			80,964			(27,160	)
Guaranty fund assessments		86,000			713,000			(627,000	)
Deferred revenue		4130,250			5241,250			(11,000	)
Payable for securities purchased		76,~~082~~179			~~390~~7,~~508~~082			(~~383,426~~903	)
Other payables, withholdings and escrows		(~~243~~194,~~134~~751	)		(~~133~~243,~~294~~134	)		~~(109~~48,~~840~~383	)
Total other liabilities	$	810,~~882~~420,~~142~~062		$	158,~~173~~882,~~652~~142		$	(61,~~291~~537,~~510~~920	)

The $81,~~905~~894,~~801~~807 ~~decrease~~increase in suspense accounts payable is due to ~~decreased~~increased ~~annuity~~ deposits on policy applications that had not been issued as of the financial reporting date.

AsThe ~~of December 31, 2023, the Company had~~ $7220,~~082~~689 inincrease ~~security purchases where the trade date and settlement date were~~ in ~~different~~account ~~financial~~payable ~~reporting~~is ~~periods~~primarily ~~compared~~amounts owed to ~~$390,508~~a oflottery ~~security purchases overlapping financial reporting periods as of December 31, 2022~~vendor.

The $~~134~~627,000 decrease in ~~accrued~~the ~~expense~~guaranty ~~payable~~fund assessments is primarily due to a ~~decrease~~reduction in potential assessments in the ~~regulatory~~event ~~financial~~insurance ~~examination~~entities ~~accrual~~become insolvent or default on other insurance obligations.

The $109,840 decrease in other payables, withholdings and escrows is primarily due to the increase in escrow advances.

The increase in unclaimed funds of $150,288 is due to increased outstanding checks that will be escheated to the states.

The increase in mortgage loan suspense of $3,185,928 is primarily due to timing of principal loan payments on mortgage loans.

Liquidity and Capital Resources

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.

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.

As of December 31, ~~2023~~2024, we had cash and cash equivalents totaling $3364,~~839~~344,~~741~~122. As of December 31, ~~2023~~2024, cash and cash equivalents of $1335,~~862~~799,~~341~~002 and $1222,~~652~~206,~~783~~273, respectively, totaling $2658,~~515~~005,~~124~~275 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the OID 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 $27,~~247~~079,~~082~~124 as of December 31, ~~2023~~2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,~~373~~067,~~511~~766 in ~~2024~~2025 without prior approval. ~~In 2022,~~ FBLIC has paid ano ~~$3,200,000~~dividends ~~dividend~~ to TLIC, ofin ~~which~~2024 ~~$1,495,631 was considered ordinary~~ and ~~$1,704,369 was considered extraordinary~~2023. ~~Dividends paid by FBLIC to~~ TLIC ~~are eliminated in consolidation. TLIC~~ has paid no dividends to FTFC. ~~In 2022, TLIC returned $2,200,000 in capital to FTFC. This return of capital by TLIC to FTFC is eliminated in consolidation.~~

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 $2650,~~017~~995,~~084~~135 and $3226,~~933~~017,~~850~~084 as of December 31, ~~2023~~2024 and December 31, ~~2022~~2023, 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 years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2023			2022			2023 less 2022
	2024			2023			2024 less 2023
Net cash provided by operating activities	$	4090,~~390~~007,~~718~~676		$	3040,~~038~~390,~~812~~718		$	1049,~~351~~616,~~906~~958
Net cash used in investing activities		(434,~~597~~471,~~261~~710	)		(334,~~736~~597,~~804~~261	)		(29,~~139~~874,~~543~~449	)
Net cash used in financing activities		(3525,~~496~~031,~~441~~585	)		(535,~~287~~496,~~329~~441	)		~~(30~~10,~~209~~464,~~112~~856	)
Increase (decrease) in cash		297,016			(8,985,321	)		9,282,337
Increase in cash		30,504,381			297,016			30,207,365
Cash and cash equivalents, beginning of period		33,~~542~~839,~~725~~741			4233,~~528~~542,~~046~~725			(8297,~~985,321~~016	)
Cash and cash equivalents, end of period	$	3364,~~839~~344,~~741~~122		$	33,~~542~~839,~~725~~741		$	~~297~~30,~~016~~504,381

The cash provided by operating activities for the years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Premiums collected	$	41,852,394		$	38,693,776		$	3,158,618
Net investment income collected		27,123,406			26,205,489			917,917
Service fees and other income collected		3,766,316			5,135,220			(1,368,904	)
Death benefits paid		(12,600,450	)		(13,680,462	)		1,080,012
Surrenders paid		(2,471,376	)		(2,173,694	)		(297,682	)
Dividends and endowments paid		(390,831	)		(365,276	)		(25,555	)
Commissions paid		(16,134,886	)		(12,744,748	)		(3,390,138	)
Other underwriting, insurance and acquisition expenses paid		(11,190,335	)		(11,217,061	)		26,726
Taxes received (paid)		4,640,446			(3,736,959	)		8,377,405
(Increased) decreased advances to a mortgage loan originator		(258,923	)		255,326			(514,249	)
Decreased advances to independently owned investment firm		2,045,191			2,954,809			(909,618	)
Decreased (increased) advances to an investment vendor		296,477			(296,477	)		592,954
Decreased funds under coinsurance agreement		51,632,390			17,340,015			34,292,375
Increased (decreased) deposits of pending policy applications		1,894,807			(8,905,801	)		10,800,608
Increased mortgage loan suspense		69,757			3,185,928			(3,116,171	)
Other		(266,707	)		(259,367	)		(7,340	)
Cash provided by operating activities	$	90,007,676		$	40,390,718		$	49,616,958

Please see the consolidated statements of cash flows for the years ended December 31, 2024 and 2023 for a summary of the components of net cash used in investing activities and financing activities.

~~The~~Our ~~cash~~shareholders’ ~~provided~~equity byas ~~operating~~of ~~activities for the years ended~~ December 31, ~~2023~~2024 and ~~2022~~2023 ~~are~~is summarized as follows:

	Years Ended December 31,						Amount Change
							Amount Change
	2023			2022			2023 less 2022
	December 31, 2024			December 31, 2023			2024 less 2023
Premiums collected	$	38,693,776		$	35,760,183		$	2,933,593
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)	$	96,319		$	96,319		$	-
Net investment income collected		26,205,489			20,638,225			5,567,264
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)		1,011			1,011			-
Service fees and other income collected		5,135,220			3,027,055			2,108,165
Additional paid-in capital		43,668,023			43,668,023			-
Death benefits paid		(13,680,462	)		(12,311,907	)		(1,368,555	)
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)		(893,947	)		(893,947	)		-
Surrenders paid		(2,173,694	)		(1,414,622	)		(759,072	)
Accumulated other comprehensive loss		(11,024,079	)		(9,641,308	)		(1,382,771	)
Dividends and endowments paid		(365,276	)		(331,245	)		(34,031	)
Accumulated earnings		37,202,901			30,786,110			6,416,791
Commissions paid		(12,744,748	)		(12,287,493	)		(457,255	)
Total shareholders' equity	$	69,050,228		$	64,016,208		$	5,034,020
Other underwriting, insurance and acquisition expenses paid		(11,217,061	)		(9,075,210	)		(2,141,851	)
Taxes paid		(3,736,959	)		(2,541,283	)		(1,195,676	)
(Increased) decreased advances to mortgage loan originator		255,326			(411,050	)		666,376
Decreased advances to private equity company		-			3,000,000			(3,000,000	)
(Increased) decreased advances to independently owned investment firm		2,954,809			(5,000,000	)		7,954,809
Increased advances to an investment vendor		(296,477	)		-			(296,477	)
Decreased funds under coinsurance agreement		17,340,015			7,156,208			10,183,807
Increased (decreased) deposits of pending policy applications		(8,905,801	)		9,270,592			(18,176,393	)
Increased (decreased) mortgage loan suspense		3,185,928			(4,901,553	)		8,087,481
Other		(259,367	)		(539,088	)		279,721
Cash provided by operating activities	$	40,390,718		$	30,038,812		$	10,351,906

~~Please~~The ~~see~~increase ~~the~~in ~~consolidated~~shareholders’ ~~statements~~equity of ~~cash~~$5,034,020 ~~flows~~ for the ~~years~~year ended December 31, ~~2023~~2024 ~~and~~is ~~2022~~primarily ~~for~~due ato ~~summary~~$6,416,791 ofin ~~the~~net ~~components~~income ofand ~~net~~$1,382,771 ~~cash~~increase ~~used~~ in ~~investing~~accumulated ~~activities~~other ~~and~~comprehensive ~~financing activities~~loss.

~~Our~~The ~~shareholders’~~liquidity ~~equity~~requirements asof 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 ~~December~~funds, 31while investment purchases, policy benefits, and operating expenses are the primary uses of funds. There were no liquidity issues in 2024 or 2023. 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 ~~2022~~the iscurrent ~~summarized~~level of shareholders’ equity continue to provide a sound financial base as ~~follows:~~we strive to expand our marketing to offer competitive products.

							Amount Change
	December 31, 2023			December 31, 2022			2023 less 2022
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2023 and 2022, 9,631,920 issued as of December 31, 2023 and 2022, 9,384,340 outstanding as of December 31, 2023 and 2022)	$	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 December 31, 2023 and 2022)		1,011			1,011			-
Additional paid-in capital		43,668,023			43,668,023			-
Treasury stock, at cost (247,580 shares as of December 31, 2023 and 2022)		(893,947	)		(893,947	)		-
Accumulated other comprehensive loss		(9,641,308	)		(14,319,679	)		4,678,371
Accumulated earnings		30,786,110			23,100,785			7,685,325
Total shareholders' equity	$	64,016,208		$	51,652,512		$	12,363,696

Our investment portfolio had unrealized depreciation on available-for-sale securities of ($13,957,881) and ($12,207,282) as of December 31, 2024 and 2023, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $1,849,782 in unrealized losses arising for year ended December 31, 2024 has been increased by 2024 net realized investment losses of $99,183 originating from the sale, calls and maturities for fixed maturity securities available-for-sale resulting in net unrealized losses on investments of $1,750,599.

The increase in shareholders’ equity of $12,363,696 for the year ended December 31, 2023 is primarily due to $7,915,361 of net income less a $230,036 credit loss cumulative effect adjustment and $4,678,371 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 2023 or 2022. 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 depreciation on available-for-sale securities of ($12,207,282) and ($18,131,268) as of December 31, 2023 and 2022, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. A decrease of $5,580,785 in unrealized losses arising for year ended December 31, 2023 has been decreased by 2023 net realized investment losses of $52,016 originating from the sale, calls and maturities for fixed maturity securities available-for-sale resulting in net unrealized gains on investments of $5,632,801.

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 December 31, 2023, 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 9.9% 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.33

InAs ~~addition~~of toDecember ~~the~~31, ~~measures described above~~2024, ~~TLIC~~cash and ~~FBLIC~~cash ~~must~~equivalents, ~~comply~~short-term ~~with~~investments, the ~~National~~fair ~~Association~~value of ~~Insurance~~fixed ~~Commissioners~~maturity ~~promulgated Standard Valuation Law (“SVL”) which specifies minimum reserve levels and prescribes methods~~ available-for-sale ~~determining~~securities ~~them,~~ with ~~the~~maturities ~~intent~~ of ~~enhancing~~less ~~solvency.~~than ~~Upon~~one ~~meeting~~year ~~certain tests, which TLIC~~ and ~~FBLIC met during 2023,~~ the ~~SVL~~fair ~~also~~value ~~requires~~of ~~the~~lottery ~~Company~~receivables towith ~~perform~~maturities ~~annual~~of ~~cash~~less ~~flow~~than ~~testing~~one ~~for~~year ~~TLIC~~equaled ~~and FBLIC~~14.5% ~~This~~of ~~testing~~total ispolicy ~~designed~~liabilities. toIf ~~ensure~~interest ~~that~~rates ~~statutory~~rise ~~reserve~~significantly ~~levels will maintain adequate protection~~ in a ~~variety~~short oftime ~~potential~~frame, ~~interest~~there ~~rate~~can ~~scenarios.~~be ~~The~~no ~~Actuarial~~assurance ~~Standards~~that ~~Board of~~ the ~~American~~life ~~Academy~~insurance ofindustry, ~~Actuaries~~including ~~also requires cash flow testing as a basis for~~ the ~~actuarial~~Company, ~~opinion~~would onnot ~~the~~experience ~~adequacy~~increased levels of ~~the~~surrenders ~~reserves~~and ~~which~~reduced issales, aand ~~required~~thereby ~~part~~be ofmaterially ~~the~~adversely ~~annual statutory reporting process~~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 2024, 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 December 31, ~~2023~~2024, the Company has outstanding advances to this loan originator totaling $4,~~487~~746,~~715~~638. The advances are secured by $79,~~919~~542,~~165~~484 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $1,~~512~~253,~~285~~362 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.

34 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 December 31, 2024, $754,448 of additional and secured residential mortgage loan balances on real estate are held in escrow by the loan originator. As of December 31, 2024, $738,411 of that escrow amount is available to the Company as additional collateral on $4,746,638 of advances to the loan originator. The remaining December 31, 2024 escrow amount of $16,037 is available to the Company as additional collateral on its investment of $3,207,399 in mortgage loans on real estate.

~~Effective~~We ~~January~~are 1,not ~~2019,~~aware ~~the~~of ~~Company~~any ~~also~~commitments ~~entered~~or ~~into~~unusual aevents ~~revised~~that ~~escrow~~could ~~agreement~~materially ~~with~~affect ~~the~~our ~~same~~capital ~~loan originator~~resources. ~~According~~We toare ~~the~~not ~~revised~~aware ~~terms~~ of ~~the~~any ~~escrow~~current ~~agreement,~~recommendations asby ofany ~~December~~regulatory ~~31,~~authority ~~2023~~which, ~~$890~~if implemented,~~915~~ ofwould ~~additional~~have ~~and~~a ~~secured~~material ~~residential~~adverse ~~mortgage~~effect ~~loan balances~~ on ~~real~~our ~~estate~~liquidity, ~~are~~capital ~~held~~resources inor ~~escrow by the loan originator~~operations. As ofWe ~~December~~believe ~~31, 2023, $850,039 of~~ that ~~escrow~~our ~~amount~~existing iscash ~~available~~and tocash ~~the~~equivalents ~~Company~~ as ~~additional collateral on $4,487,715~~ of ~~advances to the loan originator. The remaining~~ December 31, ~~2023~~2024 ~~escrow~~will ~~amount~~be ofsufficient ~~$40,876 is available~~ to ~~the~~fund ~~Company~~our asanticipated ~~additional~~operating ~~collateral on its investment of $8,175,212 in mortgage loans on real estate~~expenses.

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 December 31, 2023 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~~; and~~.

● Coronavirus disease impact on economic environment.

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.

36 35

Item 8. Financial Statements

FIRST TRINITY FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, ~~2023~~2024 AND ~~2022~~2023

Consolidated Financial Statements	Page Numbers
Report of Independent Registered Public Accounting Firm (PCAOB ID 718)	3837
Consolidated Statements of Financial Position	4039
Consolidated Statements of Operations	4140
Consolidated Statements of Comprehensive Income (Loss)	42
Consolidated Statements of Comprehensive Income	41
Consolidated Statements of Changes in Shareholders’ Equity	4342
Consolidated Statements of Cash Flows	4443
Notes to Consolidated Financial Statements	4645

37 36

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of First Trinity Financial Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of First Trinity Financial Corporation and Subsidiaries (the Company) as of December 31, ~~2023~~2024 and ~~2022~~2023, and the related consolidated statements of operations, comprehensive income ~~(loss)~~, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, ~~2023~~2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2023~~2024 and ~~2022~~2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, ~~2023~~2024, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Amortization of Deferred Policy Acquisition Costs – Refer to Notes 1 and 6

Critical Audit Matter Description

The Company’s products include traditional life insurance contracts and annuities in which certain acquisition costs are capitalized and the expenses are deferred into future periods. Management amortizes the capitalized costs of traditional life insurance products over the premium paying period of the products based on assumptions developed and consistent with assumptions used in determining the products future policy benefit liabilities. Amortization of annuity products and certain limited payment life insurance products are amortized based on actual and expected future gross profits. The unamortized deferred policy acquisition cost asset was $6066.86 million as of December 31, ~~2023~~2024.

38 37

The recovery of the unamortized deferred policy acquisition cost asset is dependent on the future profitability of the related products. Management periodically reviews the recoverability by developing an actuarial study of the present value of future profits of the products, and reduces the asset when the asset is shown to not be recoverable.

As a result, the audit of this area requires a high degree of judgment due to the complex nature of determining the amortization for the period and creation of actuarial studies for recoverability.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the amortization of the unamortized deferred policy acquisition cost asset and consideration of the recoverability of the asset included, among others, the following:

●

We gained an understanding of the processes utilized and controls implemented in amortizing the deferred policy acquisition

●

We obtained previous actuarial recoverability studies, and any current updates to the studies

●

We tested data utilized by management for completeness and accuracy

●

We engaged an independent actuarial specialist to assist with the testing of amortization and the review and evaluation of the assumptions and methodologies used by management for the study of recoverability

Future Policy Benefits – Refer to Note 1

Critical Audit Matter Description

Liabilities for amounts payable under the Company’s life insurance products are recorded as future policy benefits liabilities. Such liabilities are established based on actuarial assumptions at the time policies are issued. Management applies considerable ~~judgement~~judgment in developing the actuarial assumptions based on expectations of future economic conditions and policyholder behavior. These assumptions are developed at the time the contracts are issued, or in the case of a business combination, at the time the contracts are purchased. If actual experience is adverse in nature when compared to the original assumptions in developing the future policy benefits liability, management may be required to establish premium deficiency reserves. The Company’s future policy benefits liability was $~~123~~138.70 million as of December 31, ~~2023~~2024.

The audit of future policy benefits requires a high degree of auditor judgment when considering the complex actuarial assumptions and models management utilizes.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the liability for future policy benefits included the following procedures, among others:

●

We gained an understanding of the processes utilized and controls implemented in determining the valuation of future policy benefits

●

We tested the underlying data used by management in developing the valuation and the completeness and accuracy of the data

●

We obtained original assumption information and subsequent experience studies

●

We engaged an independent actuarial specialist to evaluate the actuarial assumptions and methodologies for reasonableness, to develop an independent estimate of future policy benefits on a sample basis and to evaluate management’s development of experience studies.

/s/ Kerber, Eck & Braeckel LLP

We have served as the Company’s auditor since 2004.

Springfield, Illinois

March 1311, ~~2024~~2025

39 38

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Financial Position

	December 31, 2023			December 31, 2022
	December 31, 2024			December 31, 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $161,908,230 and $144,744,158 as of December 31, 2023 and 2022, respectively)	$	149,700,948		$	126,612,890
Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)	$	213,745,821		$	149,700,948
Equity securities at fair value (cost: $287,375 and $276,131 as of December 31, 2023 and 2022, respectively)		419,530			399,633
Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)		5,336,062			419,530
Mortgage loans on real estate		~~239~~209,~~831~~364,~~447~~504			~~242~~239,~~314~~831,~~128~~447
Investment real estate		12,~~305~~351,~~403~~549			~~540~~1,~~436~~305,403
Policy loans		34,~~474~~367,~~116~~534			23,~~840~~474,~~887~~116
Short-term investments		~~298,257~~-			1298,~~860,578~~257
Other long-term investments		6158,~~487~~223,~~939~~514			6761,~~500~~487,~~783~~939
Total investments		~~456~~493,~~517~~388,~~640~~984			~~442~~456,~~069~~517,~~335~~640
Cash and cash equivalents		3364,~~839~~344,~~741~~122			33,~~542~~839,~~725~~741
Accrued investment income		65,~~214~~746,~~459~~167			56,~~580~~214,~~175~~459
Recoverable from reinsurers		109,~~353~~845,~~674~~838			1110,~~102~~353,~~875~~674
Assets held in trust under coinsurance agreement
Available-for-sale fixed maturity securities at fair value (amortized cost: $56,824,160 and $63,649,991 as of December 31, 2023 and 2022, respectively)		51,651,259			56,209,040
Available-for-sale fixed maturity securities at fair value (amortized cost: $22,559,107 and $56,824,160 as of December 31, 2024 and 2023, respectively)		17,932,297			51,651,259
Mortgage loans on real estate		2712,~~581~~660,~~881~~117			3127,~~028~~581,~~575~~881
Short-term investments		-			982,404
Receivable for securities		674,405			-
Payable for securities		(~~4,414~~783	)		-(4,414	)
Cash and cash equivalents		711,733			3,813,750
Cash and cash equivalents (overdraft)		(89,726	)		711,733
Total assets held in trust under coinsurance agreement		7931,~~940~~176,~~459~~310			9279,~~033~~940,~~769~~459
Agents' balances and due premiums		1,~~284~~393,~~003~~277			1,~~253~~284,~~077~~003
Deferred policy acquisition costs		6066,~~795~~640,~~108~~453			5660,~~183~~795,~~785~~108
Value of insurance business acquired		3,~~777~~593,~~353~~440			43,~~048~~777,~~105~~353
Other assets		1910,~~299~~320,~~098~~307			2019,~~050~~299,~~191~~098
Total assets	$	~~672~~686,~~021~~448,~~535~~898		$	~~665~~672,~~864~~021,~~037~~535
Liabilities and Shareholders' Equity
Policy liabilities
Policyholders' account balances	$	~~391~~431,~~247~~190,~~676~~092		$	391,~~359~~247,~~944~~676
Future policy benefits		~~123~~138,~~729~~027,~~530~~832			~~110~~123,~~012~~729,~~174~~530
Policy claims		2,~~410~~478,~~243~~465			2,~~541~~410,~~088~~243
Other policy liabilities		~~250~~226,~~294~~553			~~146~~250,~~217~~294
Total policy liabilities		~~517~~571,~~637~~922,~~743~~942			~~504~~517,~~059~~637,~~423~~743
Funds withheld under coinsurance agreement		7731,~~257~~032,~~253~~174			9277,~~301~~257,~~039~~253
Deferred federal income taxes		4,~~228~~023,~~189~~492			24,~~677~~228,~~411~~189
Other liabilities		810,~~882~~420,~~142~~062			158,~~173~~882,~~652~~142
Total liabilities		~~608~~617,~~005~~398,~~327~~670			~~614~~608,~~211~~005,~~525~~327
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2023 and 2022, 9,631,920 issued as of December 31, 2023 and 2022, 9,384,340 outstanding as of December 31, 2023 and 2022)		96,319			96,319
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)		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 December 31, 2023 and 2022)		1,011			1,011
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)		1,011			1,011
Additional paid-in capital		43,668,023			43,668,023
Treasury stock, at cost (247,580 shares as of December 31, 2023 and 2022)		(893,947	)		(893,947	)
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)		(893,947	)		(893,947	)
Accumulated other comprehensive loss		(911,~~641~~024,~~308~~079	)		(149,~~319~~641,~~679~~308	)
Accumulated earnings		3037,~~786~~202,~~110~~901			2330,~~100~~786,~~785~~110
Total shareholders' equity		6469,~~016~~050,~~208~~228			5164,~~652~~016,~~512~~208
Total liabilities and shareholders' equity	$	~~672~~686,~~021~~448,~~535~~898		$	~~665~~672,~~864~~021,~~037~~535

See notes to consolidated financial statements.

40 39

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Operations

	Years Ended December 31,
	2023			2022
	2024			2023
Revenues
Premiums	$	3841,~~912~~878,~~934~~896		$	3538,~~705~~912,~~560~~934
Net investment income		3130,~~655~~522,~~321~~580			2631,~~221~~655,~~172~~321
Net realized investment gains (losses)		~~(180~~264,~~152~~821	)		~~544~~(180,~~217~~152	)
Service fees		4,701,960			3,004,324
Loss on impairments		(129,436	)		-
Other income		666,409			83,826
Service fees		3,161,535			4,701,960
Total revenues		75,756,472			65,559,099
Other income		652,793			666,409
Total revenues		76,351,189			75,756,472
Benefits, Claims and Expenses
Benefits and claims
Increase in future policy benefits		14,~~212~~565,~~615~~010			1314,~~713~~212,~~452~~615
Death benefits		1413,~~298~~176,~~818~~508			1214,~~998~~298,~~679~~818
Surrenders		2,~~173~~471,~~694~~376			12,~~414~~173,~~622~~694
Interest credited to policyholders		15,~~093~~880,~~685~~681			1215,~~714~~093,~~469~~685
Dividend, endowment and supplementary life contract benefits		~~362~~388,~~676~~723			~~330~~362,~~598~~676
Total benefits and claims		46,~~141~~482,~~488~~298			4146,~~171~~141,~~820~~488
Policy acquisition costs deferred		(1316,~~476~~620,~~834~~462	)		(13,~~734~~476,~~859~~834	)
Amortization of deferred policy acquisition costs		810,~~863~~775,~~514~~374			78,~~280~~863,~~457~~514
Amortization of value of insurance business acquired		~~270~~183,~~752~~913			270,~~394~~752
Commissions		1216,~~803~~030,~~764~~481			12,~~776~~803,~~046~~764
Other underwriting, insurance and acquisition expenses		11,~~091~~423,~~340~~294			911,~~824~~091,~~589~~340
Total expenses		1921,~~552~~792,~~536~~600			1619,~~416~~552,~~627~~536
Total benefits, claims and expenses		6568,~~694~~274,~~024~~898			5765,~~588~~694,~~447~~024
Income before total federal income tax expense		108,~~062~~076,~~448~~291			710,~~970~~062,~~652~~448
Current federal income tax expense		1,~~778~~496,~~778~~626			~~758~~1,~~465~~778,778
Deferred federal income tax expense		~~368~~162,~~309~~874			1368,~~027,484~~309
Total federal income tax expense		21,~~147~~659,~~087~~500			12,~~785~~147,~~949~~087
Net income	$	76,~~915~~416,~~361~~791		$	67,~~184~~915,~~703~~361
Net income per common share
Class A common stock	$	0.~~8358~~6776		$	0.~~6531~~8358
Class B common stock	$	0.~~7104~~5759		$	0.~~5551~~7104

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

	Years Ended December 31,
	2024			2023
Net income	$	6,416,791		$	7,915,361
Other comprehensive income (loss)
Total net unrealized investment gains (losses) arising during the period		(1,849,782	)		5,580,785
Less net realized investment losses		(99,183	)		(52,016	)
Net unrealized investment gains (losses)		(1,750,599	)		5,632,801
Adjustment to deferred acquisition costs		(257	)		1,997
Other comprehensive income (loss) before federal income tax expense (benefit)		(1,750,342	)		5,630,804
Federal income tax expense (benefit)		(367,571	)		1,182,469
Total other comprehensive income (loss)		(1,382,771	)		4,448,335
Total comprehensive income	$	5,034,020		$	12,363,696

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries Consolidated Statements of ~~Comprehensive~~Changes ~~Income~~in ~~(Loss)~~Shareholders' Equity Years Ended December 31, 2024 and 2023

	Years Ended December 31,
	Class A			Class B								Accumulated
	2023			2022
	Common			Common			Additional					Other						Total
Net income	$	7,915,361		$	6,184,703
	Stock			Stock			Paid-in		Treasury			Comprehensive			Accumulated			Shareholders'
Other comprehensive income (loss)
	$.01 Par Value			$.01 Par Value			Capital		Stock			Loss			Earnings			Equity
Total net unrealized investment gains (losses) arising during the period		5,580,785			(33,990,160	)
Balance as of January 1, 2023	$	96,319		$	1,011		$	43,668,023	$	(893,947	)	$	(14,319,679	)	$	23,100,785		$	51,652,512
Less net realized investment gains (losses)		(52,016	)		861,782
Cumulative effect adjustment as of January 1, 2023:
Net unrealized investment gains (losses)		5,632,801			(34,851,942	)
Accumulated credit loss January 1, 2023		-			-			-		-			230,036			(230,036	)		-
Adjustment to deferred acquisition costs		1,997			(12,060	)
Adjusted balance as of January 1, 2023		96,319			1,011			43,668,023		(893,947	)		(14,089,643	)		22,870,749			51,652,512
Other comprehensive income (loss) before federal income tax expense (benefit)		5,630,804			(34,839,882	)
Comprehensive income:
Federal income tax expense (benefit)		1,182,469			(7,316,376	)
Net income		-			-			-		-			-			7,915,361			7,915,361
Total other comprehensive income (loss)		4,448,335			(27,523,506	)
Other comprehensive income		-			-			-		-			4,448,335			-			4,448,335
Total comprehensive income (loss)	$	12,363,696		$	(21,338,803	)
Balance as of December 31, 2023	$	96,319		$	1,011		$	43,668,023	$	(893,947	)	$	(9,641,308	)	$	30,786,110		$	64,016,208
Comprehensive income:
Net income		-			-			-		-			-			6,416,791			6,416,791
Other comprehensive loss		-			-			-		-			(1,382,771	)		-			(1,382,771	)
Balance as of December 31, 2024	$	96,319		$	1,011		$	43,668,023	$	(893,947	)	$	(11,024,079	)	$	37,202,901		$	69,050,228

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity Years Ended December 31, 2023 and 2022

	Class A		Class B							Accumulated
	Common		Common		Additional					Other						Total
	Stock		Stock		Paid-in		Treasury			Comprehensive			Accumulated			Shareholders'
	$.01 Par Value		$.01 Par Value		Capital		Stock			Income (Loss)			Earnings			Equity
Balance as of January 1, 2022	$	89,093	$	1,011	$	39,078,485	$	(893,947	)	$	13,203,827		$	16,916,082		$	68,394,551
Comprehensive income (loss):
Net income		-		-		-		-			-			6,184,703			6,184,703
Other comprehensive loss		-		-		-		-			(27,523,506	)		-			(27,523,506	)
Acquisition of Royalty Capital Life Insurance Company		7,226		-		4,589,538		-			-			-			4,596,764
Balance as of December 31, 2022	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(14,319,679	)	$	23,100,785		$	51,652,512
Cumulative effect adjustment as of January 1, 2023:
Accumulated credit loss January 1, 2023		-		-		-		-			230,036			(230,036	)		-
Adjusted balance as of January 1, 2023		96,319		1,011		43,668,023		(893,947	)		(14,089,643	)		22,870,749			51,652,512
Comprehensive income:
Net income		-		-		-		-			-			7,915,361			7,915,361
Other comprehensive income		-		-		-		-			4,448,335			-			4,448,335
Balance as of December 31, 2023	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(9,641,308	)	$	30,786,110		$	64,016,208

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2023			2022
	2024			2023
Operating activities
Net income	$	76,~~915~~416,~~361~~791		$	67,~~184~~915,~~703~~361
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on investments		(43,~~825~~900,~~475~~534	)		(4,~~896~~825,~~100~~475	)
Net realized investment (gains) losses		~~180~~(264,~~152~~821	)		~~(544~~180,~~217~~152	)
Amortization of policy acquisition cost		8,863,514			7,280,457
Loss on impairments		129,436			-
Policy acquisition cost deferred		(13,476,834	)		(13,734,859	)
Amortization of policy acquisition cost		10,775,374			8,863,514
Amortization of value of insurance business acquired		270,752			270,394
Policy acquisition cost deferred		(16,620,462	)		(13,476,834	)
Allowance for mortgage loan losses		43,654			413,929
Amortization of value of insurance business acquired		183,913			270,752
Provision for deferred federal income tax expense		368,309			1,027,484
Allowance for mortgage loan losses		(128,137	)		43,654
Interest credited to policyholders		15,093,685			12,714,469
Provision for deferred federal income tax expense		162,874			368,309
Interest credited to policyholders		15,880,681			15,093,685
Change in assets and liabilities:
Accrued investment income		~~(634~~468,~~284~~292	)		(~~700~~634,~~877~~284	)
Recoverable from reinsurers		~~749~~507,~~201~~836			~~578~~749,~~259~~201
Assets held in trust under coinsurance agreement		1751,~~340~~632,~~012~~390			717,~~156~~340,~~208~~012
Agents' balances and due premiums		(30109,~~926~~274	)		~~485~~(30,~~160~~926	)
Other assets		751,093			(4,818,426	)
Other assets (excludes change in receivable for securities sold of $12,920 in 2024)		8,991,711			751,093
Future policy benefits		1314,~~717~~298,~~356~~302			13,~~174~~717,~~365~~356
Policy claims		~~(130~~68,~~845~~222	)		~~108~~(130,~~513~~845	)
Other policy liabilities		~~104~~(23,~~077~~741	)		57104,~~370~~077
Other liabilities (excludes change in payable of securities purchased of ($383,426) and ($1,074,665) in 2023 and 2022, respectively)		(5,908,084	)		5,281,980
Other liabilities (excludes change in payable of securities purchased of ($903) and ($383,426) in 2024 and 2023, respectively)		1,538,823			(5,908,084	)
Net cash provided by operating activities		4090,~~390~~007,~~718~~676			3040,~~038~~390,~~812~~718
Investing activities
Purchases of fixed maturity securities		(2381,~~059~~180,~~491~~014	)		(3523,~~249~~059,~~421~~491	)
Maturities of fixed maturity securities		43,~~830~~435,000			~~952~~4,830,000
Sales of fixed maturity securities		~~457~~11,~~601~~744,021			57457,~~441,624~~601
Purchases of equity securities		(~~130~~5,~~550~~129,196	)		(~~215~~130,~~470~~550	)
Acquisition of Royalty Capital life Insurance Company		-			3,525,749
Sale of equity securities		5			-
Joint venture distribution		~~119~~115,~~306~~371			~~216~~119,~~897~~306
Purchases of mortgage loans		(~~130~~143,~~956~~991,~~402~~455	)		(~~183~~130,~~102~~956,~~781~~402	)
Payments on mortgage loans		~~132~~173,~~634~~048,~~814~~603			~~118,~~132,~~864~~634,814
Purchases of other long-term investments		(79,~~385~~470,~~062~~507	)		(137,~~327~~385,~~014~~062	)
Collections on other long-term investments		1817,~~346~~288,~~857~~490			1618,~~308~~346,~~664~~857
Sales of real estate		-276,956			~~200,080~~-
Policy loans		(~~633~~893,~~229~~418	)		(~~568~~633,~~258~~229	)
Short-term investments		1298,~~562,321~~257			31,~~022~~562,~~927~~321
Net change in receivable and payable for securities sold and purchased		(~~383~~13,~~426~~823	)		(1383,~~074,665~~426	)
Net cash used in investing activities		(434,~~597~~471,~~261~~710	)		(334,~~736~~597,~~804~~261	)
Financing activities
Policyholders' account deposits		69141,~~082~~387,~~635~~484			6769,~~308~~082,~~368~~635
Policyholders' account withdrawals		(~~104~~166,~~579~~419,~~076~~069	)		(72104,~~595~~579,~~697~~076	)
Net cash used in financing activities		(3525,~~496~~031,~~441~~585	)		(535,~~287~~496,~~329~~441	)
Increase (decrease) in cash and cash equivalents		297,016			(8,985,321	)
Increase in cash and cash equivalents		30,504,381			297,016
Cash and cash equivalents, beginning of period		33,~~542~~839,~~725~~741			4233,~~528~~542,~~046~~725
Cash and cash equivalents, end of period	$	3364,~~839~~344,~~741~~122		$	33,~~542~~839,~~725~~741

See notes to consolidated financial statements.

44 43

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

Supplemental Disclosure – Cash and Non-Cash Impact on Operating, Investing and Financing Activities

During 2024 and 2023, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and $764,967, respectively and transferred the property to investment real estate that is now held for sale.

In conjunction with this foreclosure, the non-cash impact on investing activities is summarized as follows:

	Year Ended			Year Ended
	December 31, 2023
	December 31, 2024			December 31, 2023
Reductions in mortgage loans due to foreclosure	$	~~764~~1,~~967~~441,287		$	764,967
Investment real estate held-for-sale acquired through foreclosure		(~~764~~1,~~967~~441,287	)		(764,967	)
Net cash used in investing activities	$	-		$	-

On January 4, 2022, the Company acquired Royalty Capital Life Insurance Company. The Company acquired assets of $15,778,364 (including cash) and assumed liabilities of $11,181,600.

In conjunction with this 2022 acquisition, the cash and non-cash impact on operating, investing and financing activities is summarized as follows.

	December 31, 2022
Cash used in acquisition of Royalty Capital Life Insurance Company	$	-
Cash provided in acquisition of Royalty Capital Life Insurance Company		3,525,749
Increase in cash from acquisition of Royalty Capital Life Insurance Company		3,525,749
Fair value of assets acquired in acquisition of Royalty Capital Life Insurance Company (excluding cash)
Short-term investments		1,586,667
Recoverable from reinsurers		10,634,753
Accrued investment income		8
Due premiums		25,187
Other assets		6,000
Total fair value of assets acquired (excluding cash)		12,252,615
Fair value of liabilities assumed in acquisition of Royalty Capital Life Insurance Company
Future policy benefits		8,102,093
Policyholders' account balance		3,019,610
Policy claims		51,392
Other liabilities		8,505
Total fair value of liabilities assumed		11,181,600
Fair value of net assets acquired in acquisition of Royalty Capital Life Insurance Company (excluding cash)		1,071,015
Fair value of net assets acquired in acquisition of Royalty Capital Life Insurance Company (including cash)	$	4,596,764

See notes to consolidated financial statements.

45 44

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies

The Company owns 100% of TLIC. TLIC owns 100% of FBLIC. TLIC and FBLIC are primarily engaged in the business of marketing, underwriting and distributing a broad range of individual life insurance and annuity products to individuals. TLIC’s and FBLIC’s current product portfolio consists of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term, final expense, accidental death and dismemberment and annuity products. The term products are both renewable and convertible and issued for 10, 15, 20 and 30 years. They can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense product is issued as either a simplified issue or as a graded benefit, determined by underwriting. The TLIC and FBLIC products are sold through independent agents. TLIC is licensed in the states of Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and West Virginia. FBLIC is licensed 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.

Company Capitalization

The Company raised $1,450,000 from two private placement stock offerings 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.

46 45

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

Acquisition of Other Companies

On December 23, 2008, FTFC acquired 100% of the outstanding common stock of First Life America Corporation (“FLAC”) from an unaffiliated company. The acquisition of FLAC was accounted for as a purchase. The aggregate purchase price for FLAC was $2,695,234 including direct costs associated with the acquisition of $195,234. The acquisition of FLAC was financed with the working capital of FTFC.

On December 31, 2008, FTFC made FLAC a 15 year loan in the form of a surplus note in the amount of $250,000 with an interest rate of 6% payable monthly, that was approved by the Oklahoma Insurance Department (“OID”). This surplus note is eliminated in consolidation.

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 $3,644,839, assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.

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 acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.

On January 4, 2022, FTFC acquired Royalty Capital Life Insurance Company (“RCLIC”) from Royalty Capital Corporation (“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.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Investments

Change in significant Accounting Policies – Credit Losses on Investments and Allowance for Loan Losses from Mortgage Loans

47 46

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

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 ~~(loss)~~. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity.

Prior to 2023, the Company evaluated the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value was other-than-temporary in nature. That determination involved a degree of uncertainty. If a decline in the fair value of a security was determined to be temporary, the decline was recorded as an unrealized loss in shareholders' equity. If a decline in a security's fair value is considered to be other-than-temporary, the Company then determined the proper treatment for the other-than-temporary impairment. The amount of any other-than-temporary impairment related to a credit loss was recognized in earnings and reflected as a reduction in the cost basis of the security; and the amount of any other-than-temporary impairment related to other factors is recognized in other comprehensive income (loss) with no change to the cost basis of the security. If an other-than-temporary impairment related to a credit loss occurs with respect to a bond, the Company amortized the reduced book value back to the security's expected recovery value over the remaining term of the bond. The Company continued to review the security for further impairment that would prompt another write-down in the value.

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.

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.

48 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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Organization and Significant Accounting Policies (continued)

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 financial statements to conform to current year classifications. These reclassifications had no effect on previously reported net income or shareholders' equity.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

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 $.01 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, 85% of cash dividends, stock dividends or amounts due upon any FTFC merger, sale or liquidation event. FTFC’s Class B shareholders may also convert one share of FTFC’s Class B common stock for a .85 share of FTFC’s Class A common stock. FTFC’s Class A shareholders will elect the remaining Board of Directors members and will receive 100% of cash dividends, stock dividends or amounts due upon any Company merger, sale or liquidation event.

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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks and money market instruments.

Short-term investments

Short-term investments include funds that have a maturity of more than 90 days but less than one year at the date of purchase.

Investment Income and Realized Gains and Losses on Sales of Investments

Interest and dividends earned on investments are included in net investment income. Realized gains and losses on sales of investments are recognized in operations on the specific identification basis.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Organization and Significant Accounting Policies (continued)

Deferred Policy Acquisition Costs

Commissions and other acquisition costs which vary with and are primarily related to the successful production of new business are deferred and amortized in a systematic manner based on the related contract revenues or gross profits as appropriate. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense.

Deferred acquisition costs for the successful production of traditional life insurance contracts are deferred to the extent deemed recoverable and amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities. Deferred acquisition costs related to the successful production of insurance and annuity products that subject the Company to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

To the extent that realized gains and losses on fixed income securities result in adjustments to deferred acquisition costs related to insurance and annuity products, such adjustments are reflected as a component of the amortization of deferred acquisition costs. Deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation or amortization. Office furniture, equipment and computer software is recorded at cost or fair value at acquisition less accumulated depreciation or amortization using the straight-line method over the estimated useful life of the respective assets of three to ten years. Leasehold improvements are recorded at cost and depreciated over the remaining non-cancellable lease term.

Reinsurance

The Company cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth. Estimated reinsurance recoverable balances are reported as assets and are recognized in a manner consistent with the liabilities related to the underlying reinsured ceded contracts. The Company also assumes reinsurance under various agreements allowing management to increase growth in assets and profitability. Estimated reinsurance payable balances are reported as liabilities and are recognized in a manner consistent with the assets related to the underlying assumed reinsurance contracts.

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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Organization and Significant Accounting Policies (continued)

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 Loss.

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.

Value of Insurance Business Acquired

As a result of the Company’s purchases of FLAC and FBLIC, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under Financial Accounting Standards Board (“FASB”) guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

For the amortization of the value of acquired insurance in force, the Company periodically reviews its estimates of gross profits. The most significant assumptions involved in the estimation of gross profits include interest rate spreads, future financial market performance, business surrender/lapse rates, mortality and morbidity, expenses and the impact of realized investment gains and losses. In the event actual experience differs significantly from assumptions or assumptions are significantly revised, the Company is required to record a charge or credit to amortization expense for the period in which an adjustment is made.

As of December 31, ~~2023~~2024 and ~~2022~~2023, there was $45,~~962~~146,~~525~~438 and $4,~~691~~962,~~773~~525, respectively, of accumulated amortization of the value of insurance business acquired due to the purchases of FLAC and FBLIC. The Company expects to amortize the value of insurance business acquired by the following amounts over the next five years:, $~~169~~156,~~840~~102 in ~~2024~~2025, $~~152~~142,~~011~~645 in ~~2025~~2026, $~~157~~149,~~225~~467 in ~~2026~~2027, $~~148~~144,~~123~~043 in ~~2027~~2028 and $~~153~~148,~~251~~414 in ~~2028~~2029.

Other Assets and Other Liabilities

Other assets consist primarily of advances to mortgage loan originator, receivable for securities sold, federal and state income taxes recoverable, guaranty funds, notes receivable, prepaid assets, deposits, other receivables and property and equipment.

Other liabilities consist primarily of accrued expenses payable, accounts payable, remittance and suspense items not allocated, payable for securities purchased, guaranty fund assessments, unclaimed funds, deferred revenue, unearned investment income, withholdings, escrows and other payables.

Policyholders’ Account Balances

The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 2.25% to 5.0075%. Interest crediting rates for deposit-type liabilities range from 2.50% to 4.00%.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Organization and Significant Accounting Policies (continued)

Future Policy Benefits

The Company’s liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of future net premiums. For life insurance and annuity products, expected mortality and morbidity is generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortality, morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses by establishing premium deficiency reserves.

Policy Claims

Policy claim liabilities represent the estimated liabilities for claims reported plus estimated incurred but not yet reported claims developed from trends of historical market data applied to current exposure.

Federal Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for cumulative temporary differences between balances of assets and liabilities determined under U.S. GAAP and balances determined using tax bases. A valuation allowance is established for the amount of the deferred tax asset that exceeds the amount of the estimated future taxable income needed to utilize the future tax benefits.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Accumulated Other Comprehensive Income (Loss)

FASB guidance requires the inclusion of unrealized gains or losses on available-for-sale securities, net of tax, as a component of other comprehensive income (loss). Unrealized gains and losses recognized in accumulated other comprehensive income (loss) that are later recognized in net income through a reclassification adjustment are identified on the specific identification method. In addition, deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.

Revenues and Expenses

Revenues on traditional life insurance products consist of direct premiums reported as earned when due. Liabilities for future policy benefits are provided and acquisition costs are amortized in a systematic manner based on the related contract revenues or gross profits as appropriate.

The Company generates fee income and recognizes revenue from providing contractual services to third parties that are outside traditional life insurance sources of revenues. This fee income is recognized as revenue in the Service Fees caption of the Statement of Operations for the years ended December 31, ~~2023~~2024 and ~~2022~~2023. The primary source of this fee income during ~~2023~~2024 and ~~2022~~2023 was the recognition of fee income from providing residential mortgage loan on real estate lending opportunities to third parties through the introduction of qualified borrowers identified and provided by the Company. This fee income is associated with a single performance obligation and is not recognized as revenue until the point in time the third party issues a residential mortgage loan on real estate to a qualified borrower identified and provided by the Company. Additional fee income with one specific third party is recognized by the Company as contractual revenues for the Company being available to provide and providing services to manage brokered residential mortgage loans on real estate during the period that the obligations are held by the third party for the qualified borrower identified and provided by the Company.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Organization and Significant Accounting Policies (continued)

Acquisition costs for traditional life insurance contracts are deferred to the extent deemed recoverable and are amortized over the premium paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities. Traditional life insurance products are treated as long-duration contracts since they generally remain in force for the lifetime of the insured.

Deferred acquisition costs related to insurance and annuity products that subject the Company to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed are deferred to the extent deemed recoverable and amortized in relation to the present value of actual and expected gross profits on the policies. These types of insurance and annuity contracts are treated as long-duration insurance contracts since they generally remain in force for an extended period.

Net Income Per Common Share Basic

~~The weighted average outstanding common shares basic for the year ended December 31, 2023 and 2022 were 9,384,340 for Class A shares and 101,102 for Class B shares.~~52

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

The weighted average outstanding common shares basic for the year ended December 31, 2024 and 2023 were 9,384,340 for Class A shares and 101,102 for Class B shares.

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.

Subsequent Events

Management has evaluated all events subsequent to December 31, ~~2023~~2024 through the date that these financial statements have been issued.

On February 23, 2024, the Board of Directors of the Company unanimously voted to terminate the Share Acquisition Agreement dated April 24, 2023 (the “Agreement”) among the Company, MTCP LLC, a Florida limited liability company (the “Buyer”) and Brickell L&A Holdings LLC, a Delaware limited liability company wholly owned by the Buyer, pursuant to provisions of an amendment to the Agreement giving the Company the right to terminate the Agreement. The Company gave notice of the termination on February 26, 2024.

Adopted Accounting Standards

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments

54 53

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

Troubled Debt Restructurings and Vintage Disclosures

Improvements to Reportable Segment Disclosures

Cybersecurity Risk Management, Strategy, Governance and Incident Disclosures by Public Companies

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Recent Accounting Pronouncements

Targeted Improvements to the Accounting for Long-Duration Contracts

Transition for Sold Contracts

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

Transition for Sold Contracts

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued amendments (Accounting Standards Update 2023-07) to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The amendments require public entities to follow the significant expense principle and disclose on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) with additional disclosure of the CODM’s title, position and how the reported measure(s) of segment profit or loss are used in assessing segment performance and allocating resources. In addition, amounts for other segment items are required to be disclosed including a description of its composition. If the COMD uses more than one measure in assessing segment performance and allocating resources, at least one of the measures should be consistent with the corresponding amounts utilized in the public entity’s consolidated financial statements.

The amendments in this guidance are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company anticipates adopting and disclosing this Update for year-end reporting in 2024 and for interim periods beginning in 2025.

Improvements to Income Tax Disclosures

The amendments in this guidance are effective for public companies for fiscal years beginning after ~~December~~ ~~15, 2024, and interim periods within fiscal years beginning after~~ December 15, 2024. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2025.

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.

Debt With Conversion and Other Options

In November 2024, the FASB issued amendments (Accounting Standards Update 2024-04) to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted as an induced conversion. Under this Update, an inducement offer is required to provide the debt holder with, at a minimum, the consideration in form and amount issuable under the conversion privileges provided in the instrument. If the convertible debt instrument has been exchanged, modified or deemed not substantially different within the one-year period before the settlement date, the current inducement offer should be compared to the inducement offer that existed one-year before the settlement date.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

1. Organization and Significant Accounting Policies (continued)

~~Cybersecurity~~The ~~Risk~~amendments ~~Management,~~to ~~Strategy~~this Update are effective for annual reporting periods beginning after December 15, ~~Governance~~2025 and ~~Incident~~interim ~~Disclosures~~reporting periods within that annual reporting period. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company does not have or anticipate having any debt instruments and anticipates never being required to adopt the information required by ~~Public~~this ~~Companies~~Update.

The Company has not ever had a material cyber security incident but will follow the Cybersecurity Final Rule regarding timely disclosure of a material cyber security incident. The Company has also disclosed its strategy and governance with respect to its cybersecurity risk management program in this December 31, 2023 Form 10-K.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments

Fixed Maturity Securities

Investments in fixed maturity securities as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

Gross

Amortized Cost

Unrealized

Fair

or Cost

Gains

Losses

Value

December 31, 2023

December 31, 2024

Fixed maturity securities

U.S. government and U.S. government agencies

34,~~806~~263,~~419~~791

1412,~~360~~654

~~22,495~~480

34,~~798~~275,~~284~~965

States and political subdivisions

98,~~773~~156,~~549~~851

~~97,215~~173

~~338~~463,~~894~~791

97,~~531~~693,~~870~~233

U.S. government agency mortgage backed securities

1041,~~097~~085,~~479~~693

~~208~~20,~~985~~347

-870,659

1040,~~306~~235,~~464~~381

Commercial mortgage-backed securities

1019,~~629~~999,~~003~~386

-5,070

21,~~157~~505,~~465~~058

818,~~471~~499,~~538~~398

Residential mortgage-backed securities

9,~~986~~750

4,~~328~~361

14,~~314~~111

Corporate bonds

85106,~~901~~678,~~454~~530

6528,~~239~~519

67,~~625~~350,~~386~~495

7999,~~341~~356,~~307~~554

Asset-backed securities

1215,~~466~~628,~~601~~104

4367,~~424~~390

1796,~~017,529~~910

1114,~~492~~898,~~496~~584

Exchange traded securities

~~882~~1,~~631~~184,560

~~406~~687,~~631~~760

~~476~~496,~~000~~800

Foreign bonds

2729,~~091~~447,~~108~~037

245,~~186~~683

12,~~902~~212,~~619~~925

2527,~~212~~239,~~675~~795

Redeemable preferred securities

1,250,000

~~194~~214,000

1,~~056~~036,000

Total fixed maturity securities

~~161~~227,~~908~~703,~~230~~702

~~457~~144,~~737~~197

1214,~~665~~102,~~019~~078

~~149~~213,~~700~~745,~~948~~821

Fixed maturity securities held in trust under coinsurance agreement

5622,~~824~~559,~~160~~107

5321,~~496~~034

54,~~226~~647,~~397~~844

5117,~~651~~932,~~259~~297

	December 31, 2022
	December 31, 2023
Fixed maturity securities
U.S. government and U.S. government agencies	$	23,~~097~~806,~~558~~419	$	-14,360	$	4222,~~993~~495	$	23,~~054~~798,~~565~~284
States and political subdivisions		49,~~966~~773,~~770~~549		297,~~268~~215		~~408~~338,~~717~~894		49,~~560~~531,~~321~~870
Commercial mortgage-backed securities		10,608,213		-		2,274,575		8,333,638
U.S. government agency mortgage backed securities		10,097,479		208,985		-		10,306,464
Residential mortgage-backed securities		10,550		4,700		-		15,250
Commercial mortgage-backed securities		10,629,003		-		2,157,465		8,471,538
Corporate bonds		88,394,563		35,464		10,317,890		78,112,137
Residential mortgage-backed securities		9,986		4,328		-		14,314
Asset-backed securities		9,538,593		-		1,539,164		7,999,429
Corporate bonds		85,901,454		65,239		6,625,386		79,341,307
Exchange traded securities		682,280		-		215,080		467,200
Asset-backed securities		12,466,601		43,424		1,017,529		11,492,496
Foreign bonds		26,995,631		-		3,225,551		23,770,080
Exchange traded securities		882,631		-		406,631		476,000
Redeemable preferred securities		1,250,000		-		148,800		1,101,200
Foreign bonds		27,091,108		24,186		1,902,619		25,212,675
Certificate of deposits		200,000		-		930		199,070
Redeemable preferred securities		1,250,000		-		194,000		1,056,000
Total fixed maturity securities	$	~~144~~161,~~744~~908,~~158~~230	$	42457,~~432~~737	$	1812,~~173~~665,~~700~~019	$	~~126~~149,~~612~~700,~~890~~948
Fixed maturity securities held in trust under coinsurance agreement	$	6356,~~649~~824,~~991~~160	$	853,~~224~~496	$	75,~~449~~226,~~175~~397	$	5651,~~209~~651,~~040~~259

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

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 December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

			Unrealized		Number of
	Fair Value		Loss		Securities
	December 31, 2023
	December 31, 2024
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies	$	~~231~~810,~~010~~291	$	~~100~~480		14
States and political subdivisions		~~120~~4,~~734~~350,258		~~588~~95,994		112
Corporate bonds		3,762,988		78,589		14
U.S. government agency mortgage backed securities		35,821,510		870,659		52
Foreign bonds		502,835		8,573		2
Commercial mortgage-backed securities		9,319,025		91,842		15
Total less than 12 months in an unrealized loss position		4,617,567		87,850		18
Corporate bonds		33,196,771		810,633		84
Asset-backed securities		1,811,793		29,633		6
Foreign bonds		5,707,531		185,096		11
Total less than 12 months in an unrealized loss position		91,017,179		2,084,337		184
More than 12 months in an unrealized loss position
U.S. government and U.S. government agencies		1,876,612		22,395		3
States and political subdivisions		3,102,931		367,797		18
States and political subdivisions		4,411,017		338,306		21
Commercial mortgage-backed securities		7,541,167		1,413,216		21
Commercial mortgage-backed securities		8,471,538		2,157,465		24
Corporate bonds		61,587,904		6,539,862		182
Corporate bonds		72,550,042		6,546,797		214
Asset-backed securities		7,391,463		767,277		21
Asset-backed securities		7,390,830		1,017,529		20
Exchange traded securities		496,800		687,760		2
Exchange traded securities		476,000		406,631		2
Foreign bonds		20,747,051		2,027,829		55
Foreign bonds		23,164,587		1,894,046		61
Redeemable preferred securities		1,036,000		214,000		4
Redeemable preferred securities		306,000		194,000		2
Total more than 12 months in an unrealized loss position		101,903,316		12,017,741		303
Total more than 12 months in an unrealized loss position		118,646,626		12,577,169		347
Total fixed maturity securities in an unrealized loss position	$	192,920,495	$	14,102,078		487
Total fixed maturity securities in an unrealized loss position	$	123,264,193	$	12,665,019		365
Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position	$	1110,~~400,820~~506	$	~~5,810~~616		71
Total more than 12 months in an unrealized loss position		4715,~~082~~142,~~945~~397		54,~~220~~647,~~587~~228		~~180~~67
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	4815,~~483~~252,~~765~~903	$	54,~~226~~647,~~397~~844		~~187~~68

	December 31, 2022
	December 31, 2023
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies	$	1231,~~760,073~~010	$	~~37,231~~100	21
States and political subdivisions		3120,~~325,252~~734		~~301,788~~588	201
Commercial mortgage-backed securities		5,863,255		1,387,792	17
Corporate bonds		3,762,988		78,589	14
Corporate bonds		69,451,263		8,733,104	216
Foreign bonds		502,835		8,573	2
Asset-backed securities		5,042,586		890,318	12
Total less than 12 months in an unrealized loss position		4,617,567		87,850	18
Foreign bonds		21,766,704		2,785,419	61
Certificate of deposits		199,070		930	1
Total less than 12 months in an unrealized loss position		107,408,203		14,136,582	329
More than 12 months in an unrealized loss position
U.S. government and U.S. government agencies		~~294~~1,~~492~~876,612		522,~~762~~395	23
States and political subdivisions		~~766~~4,~~424~~411,017		~~106~~338,~~929~~306	321
Commercial mortgage-backed securities		28,~~470~~471,~~383~~538		~~886~~2,~~783~~157,465	724
Corporate bonds		672,~~314~~550,~~364~~042		16,~~584~~546,~~786~~797	20214
Asset-backed securities		27,~~956~~390,~~843~~830		~~648~~1,~~846~~017,529	920
Exchange traded securities		~~467~~476,~~200~~000		~~215~~406,~~080~~631	2
Foreign bonds		223,~~003~~164,~~376~~587		~~440~~1,~~132~~894,046	661
Redeemable preferred securities		~~351~~306,~~200~~000		~~148~~194,~~800~~000	2
Total more than 12 months in an unrealized loss position		15118,~~624~~646,~~282~~626		412,~~037~~577,~~118~~169	51347
Total fixed maturity securities in an unrealized loss position	$	123,~~032~~264,~~485~~193	$	1812,~~173~~665,~~700~~019	~~380~~365
Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position	$	491,~~918~~400,~~808~~820	$	5,~~679,624~~810	~~231~~7
Total more than 12 months in an unrealized loss position		547,~~524~~082,~~318~~945		15,~~769~~220,~~551~~587	21180
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	5548,~~443~~483,~~126~~765	$	75,~~449~~226,~~175~~397	~~252~~187

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

As of December 31, 2024, the Company held 487 available-for-sale fixed maturity securities with an unrealized loss of $14,102,078, fair value of $192,920,495 and amortized cost of $207,022,573. These unrealized losses were primarily due to market interest rate movements in the bond market as of December 31, 2024. The ratio of the fair value to the amortized cost of these 487 securities is 93%.

As of December 31, 2023, the Company held 365 available-for-sale fixed maturity securities with an unrealized loss of $12,665,019, fair value of $123,264,193 and amortized cost of $135,929,212. These unrealized losses were primarily due to market interest rate movements in the bond market as of December 31, 2023. The ratio of the fair value to the amortized cost of these 365 securities is 91%.

AsThe ~~of December~~change ~~31,~~in ~~2022,~~ the ~~Company~~current ~~held~~estimate ~~380 available-for-sale fixed maturity securities with an unrealized loss~~ of ~~$18,173,700,~~credit ~~fair value of $123,032,485 and amortized cost of $141,206,185. These unrealized~~ losses ~~were~~on ~~primarily~~fixed ~~due~~maturity toavailable-for-sale ~~market~~securities ~~interest~~for ~~rate movements in~~ the ~~bond~~year ~~market~~ended ~~as of~~ December 31, ~~2022.~~2024 ~~The~~and ~~ratio~~2023, ofare ~~the~~summarized ~~fair~~as ~~value to the amortized cost of these 380 securities is 87%.~~follows:

The change in the current estimate of credit losses on fixed maturity available-for-sale securities for the year ended December 31, 2023 is summarized as follows:

	December 31, 2024			December 31, 2023

Beginning balance	$	(430,470	)	$	-
Cumulative adjustment to accumulated earnings as of January 1, 2023		-			(291,185	)
Current estimate of credit losses		(295,490	)		(139,285	)
Ending balance	$	(725,960	)	$	(430,470	)

	(Unaudited)
	December 31, 2023
Beginning balance	$	-
Cumulative adjustment to accumulated earnings as of January 1, 2023		(291,185	)
Current estimate of credit losses		(139,285	)
Ending balance	$	(430,470	)

Net unrealized losses included in other comprehensive loss for investments classified as available-for-sale, net of the effect of deferred income taxes and deferred acquisition costs assuming that the depreciation had been realized as of December 31, 2024 and 2023 are summarized as follows:

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 deferred acquisition costs assuming that the depreciation had been realized as of December 31, 2023 and 2022 are summarized as follows:

	December 31, 2024			December 31, 2023
Unrealized depreciation on available-for-sale securities	$	(13,957,881	)	$	(12,207,282	)
Adjustment to deferred acquisition costs		3,351			3,094
Deferred income taxes		2,930,451			2,562,880
Net unrealized depreciation on available-for-sale securities	$	(11,024,079	)	$	(9,641,308	)
Assets held in trust under coinsurance agreement
Unrealized depreciation on fixed maturity securities available-for-sale	$	(4,626,810	)	$	(5,172,901	)

	December 31, 2023			December 31, 2022
Unrealized depreciation on available-for-sale securities	$	(12,207,282	)	$	(18,131,268	)
Adjustment to deferred acquisition costs		3,094			5,091
Deferred income taxes		2,562,880			3,806,498
Net unrealized depreciation on available-for-sale securities	$	(9,641,308	)	$	(14,319,679	)
Assets held in trust under coinsurance agreement
Unrealized depreciation on fixed maturity securities available-for-sale	$	(5,172,901	)	$	(7,440,951	)

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

The amortized cost and fair value of fixed maturity available-for-sale securities as of December 31, ~~2023~~2024, by contractual maturity, are summarized as follows:

	December 31, 2023
	December 31, 2024
	Fixed Maturities Available-For-Sale Securities
	Amortized Cost		Fair Value
Due in one year or less	$	34,~~303~~763,~~802~~309	$	34,~~370~~760,~~422~~688
Due in one year through five years		3142,~~689~~505,~~156~~354		3040,~~411~~711,~~513~~256
Due after five years through ten years		2442,~~768~~007,~~591~~924		2339,~~731~~132,~~965~~467
Due after ten years		90117,~~257~~167,~~692~~979		82109,~~645~~591,~~196~~901
Due at multiple maturity dates		1121,~~888~~259,~~989~~136		919,~~541~~549,~~852~~509
	$	~~161~~227,~~908~~703,~~230~~702	$	~~149~~213,~~700~~745,~~948~~821

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.

The amortized cost and fair value of fixed maturity available-for-sale securities held in trust under coinsurance agreement as of December 31, ~~2023~~2024, by contractual maturity, are summarized as follows:

	December 31, 2023
	December 31, 2024
	Fixed Maturity Available-For-Sale Securities
	Amortized Cost		Fair Value
Due in one year or less	$	1449,~~183,080~~835	$	1448,~~177,915~~424
Due after one year through five years		271,~~579~~536,~~589~~033		271,~~071~~505,~~969~~670
Due after five years through ten years		83,~~120~~412,~~483~~424		73,~~893~~270,~~466~~622
Due after ten years		1614,~~827~~372,~~762~~598		1210,~~909~~249,~~324~~874
Due at multiple maturity dates		32,~~113~~788,~~246~~217		2,~~598~~457,~~585~~707
	$	5622,~~824~~559,~~160~~107	$	5117,~~651~~932,~~259~~297

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, equity securities, investment real estate, mortgage loans on real estate and other long-term investments for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,
	Fixed Maturity Securities						Equity Securities						Investment Real Estate
	2023			2022			2023			2022			2023			2022
	2024			2023			2024			2023			2024			2023
Proceeds	$	515,~~287~~179,~~601~~021		$	585,~~393~~287,~~624~~601		$	-5		$	-		$	-276,956		$	~~200,080~~-
Gross realized gains		~~265~~26,~~625~~198			1265,~~230,951~~625			-			-			-11,251			~~55,867~~-
Gross realized losses		(~~317~~125,~~641~~381	)		(~~369~~317,~~169~~641	)		-(4	)		~~(8,000~~-	)		-			~~(3,696~~-	)
Loss on impairments		-			-			-			-			(129,436	)

	Years Ended December 31,
	Mortgage Loans on Real Estate					Other Long-Term Investments
	2023			2022		2023		2022
	2024			2023		2024		2023
Proceeds	$	~~132~~173,~~634~~048,~~814~~603		$	~~118,~~132,~~864~~634,814	$	-17,288,490	$	~~16,308,664~~-
Gross realized gains		2734,~~496~~323			-2,496		-45,650		-
Gross realized losses		-(34,442	)		-		-		~~(422,578~~-	)
Loss on impairments		-			-		-		-

The accumulated change in net unrealized investment gains (losses) for fixed maturity available-for-sale securities for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 and the amount of net realized investment gains (losses) on fixed maturity securities available-for-sale, equity securities, investment real estate, mortgage loans on real estate and other long-term investments for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Change in unrealized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities	$	5(1,~~632~~750,~~801~~599	)	$	~~(34~~5,~~851~~632,~~942~~801	)
Fixed maturity securities held in trust under coinsurance agreement		2546,~~268,050~~091			~~(10~~2,~~918~~268,~~940~~050	)
Net realized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities		(5299,~~016~~183	)		~~861~~(52,~~782~~016	)
Fixed maturity securities credit losses		(~~139~~295,~~285~~490	)		-(139,285	)
Equity securities, sale of securities		-(4	)		~~(8,000~~-	)
Equity securities, changes in fair value		8(97,~~653~~284	)		608,~~842~~653
Investment real estate		-11,251			~~52,171~~-
Mortgage loans on real estate		2699,~~496~~881			-2,496
Other long-term investments		-45,650			~~(422,578~~-	)

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

Mortgage Loans on Real Estate

The Company’s mortgage loans by property type as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	December 31, 2023		December 31, 2022
	December 31, 2024		December 31, 2023
Residential mortgage loans	$	~~224~~195,~~258~~050,~~534~~397	$	~~223~~224,~~984~~258,~~194~~534
Commercial mortgage loans by property type
Agricultural		~~986~~244,~~207~~253		~~994~~986,~~691~~207
Apartment		34,~~108~~634,~~829~~586		3,~~625~~108,~~533~~829
Industrial		1357,~~267,264~~193		1,~~999~~267,~~438~~264
Lodging		~~24,727~~-		~~268~~24,~~741~~727
Office building		54,~~652~~120,~~487~~057		5,~~681~~652,~~946~~487
Retail		4,~~533~~958,~~399~~018		54,~~759~~533,~~585~~399
Total commercial mortgage loans by property type		1514,~~572~~314,~~913~~107		1815,~~329~~572,~~934~~913
Total mortgage loans	$	~~239~~209,~~831~~364,~~447~~504	$	~~242~~239,~~314~~831,~~128~~447
Mortgage loans held in trust under coinsurance agreement
Commercial mortgage loans	$	2712,~~714~~660,~~891~~117	$	3127,~~076~~714,~~883~~891
Less unearned interest on mortgage loans		~~133,010~~-		48133,~~308~~010
Total mortgage loans held in trust under coinsurance agreement	$	2712,~~581~~660,~~881~~117	$	3127,~~028~~581,~~575~~881

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 (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans on real estate by credit quality using this ratio as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

December 31,

Residential Mortgage Loans

Commercial Mortgage Loans

Total Mortgage Loans

Loan-To-Value Ratio

~~2023~~2024

~~2022~~2023

~~2023~~2024

~~2022~~2023

~~2023~~2024

~~2022~~2023

Over 70% to 80%

7559,~~718~~821,~~654~~794

7275,~~013~~718,~~555~~654

23,~~099~~119,~~950~~335

32,~~287~~099,~~048~~950

7762,~~818~~941,~~604~~129

7577,~~300~~818,~~603~~604

Over 60% to 70%

6555,~~525~~743,~~308~~022

6765,~~780~~525,~~388~~308

2,~~958~~178,~~186~~948

32,~~033~~958,~~504~~186

6857,~~483~~921,~~494~~970

7068,~~813~~483,~~892~~494

Over 50% to 60%

3836,~~548~~901,~~660~~362

3638,~~929~~548,~~025~~660

12,~~809~~754,~~817~~800

1,~~839~~809,~~272~~817

4039,~~358~~656,~~477~~162

3840,~~768~~358,~~297~~477

Over 40% to 50%

2223,~~283~~308,~~148~~719

2022,~~100~~283,~~407~~148

23,~~394~~020,~~557~~985

12,~~272~~394,~~088~~557

2426,~~677~~329,~~705~~704

2124,~~372~~677,~~495~~705

Over 30% to 40%

10,~~056~~242,~~308~~789

1310,~~143~~056,~~773~~308

31,~~817~~094,~~212~~274

53,~~123~~817,~~894~~212

1311,~~873~~337,~~520~~063

1813,~~267~~873,~~667~~520

Over 20% to 30%

74,~~929~~944,~~094~~666

87,~~898~~929,~~731~~094

~~463~~1,~~856~~232,344

~~733~~463,~~238~~856

86,~~392~~177,~~950~~010

98,~~631~~392,~~969~~950

Over 10% to 20%

3,~~178~~052,~~001~~985

3,~~976~~178,~~357~~001

1420,~~714,394~~896

31,~~040~~714,~~890~~394

43,~~892~~473,~~395~~881

74,~~017~~892,~~247~~395

10% or less

1,~~019~~035,~~361~~060

1,~~141~~019,~~958~~361

~~314~~492,~~941~~525

-314,941

1,~~334~~527,~~302~~585

1,~~141~~334,~~958~~302

Total

~~224~~195,~~258~~050,~~534~~397

~~223~~224,~~984~~258,~~194~~534

1514,~~572~~314,~~913~~107

1815,~~329~~572,~~934~~913

~~239~~209,~~831~~364,~~447~~504

~~242~~239,~~314~~831,~~128~~447

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

The outstanding principal balance of mortgage loans, by state, as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	December 31, 2023						December 31, 2022
	December 31, 2024						December 31, 2023
	Amount			Percentage			Amount			Percentage
Alabama	$	~~516~~198,~~657~~930			0.2210	%	$	1516,~~631,291~~657			0.6722	%
Arizona		21,~~564~~738,~~148~~410			10.0783	%		12,~~095~~564,~~402~~148			01.4507	%
Arkansas		~~792~~583,~~495~~289			0.3328	%		~~736~~792,~~037~~495			0.3033	%
California		1527,~~612,~~618,504			613.5119	%		1315,~~811~~612,~~582~~618			56.7051	%
Colorado		1,~~420~~085,~~410~~111			0.5952	%		1,~~536~~420,~~180~~410			0.6359	%
Connecticut		1980,~~301,749~~186			0.5447	%		21,~~882~~301,~~731~~749			10.1954	%
Delaware		~~360~~416,~~334~~918			0.1520	%		~~155~~360,~~840~~334			0.0615	%
District of Columbia		5352,~~031~~366			0.0203	%		53,~~653~~031			0.02	%
Florida		8856,~~891~~399,~~627~~835			3726.0792	%		9488,~~748~~891,~~560~~627			3937.1107	%
Georgia		6,~~302~~969,~~274~~271			23.6333	%		76,~~314~~302,~~430~~274			32.0263	%
Hawaii		~~473~~720,~~360~~594			0.2034	%		-473,360			0.0020	%
Idaho		115,~~286~~280			0.0506	%		-115,286			0.0005	%
Illinois		21,~~562~~674,~~076~~682			10.0780	%		2,~~634~~562,~~689~~076			1.0907	%
Indiana		~~622~~151,~~476~~162			0.2607	%		~~335~~622,~~817~~476			0.1426	%
Kansas		~~153~~176,~~307~~949			0.0608	%		~~251~~153,~~815~~307			0.1006	%
Kentucky		~~192~~182,~~485~~733			0.0809	%		-192,485			0.0008	%
Louisiana		~~177~~313,~~027~~061			0.0715	%		~~189~~177,~~335~~027			0.0807	%
Maine		~~118~~116,~~911~~181			0.0506	%		~~200~~118,~~056~~911			0.0805	%
Maryland		1,~~357~~343,~~240~~155			0.5764	%		1,~~285~~357,~~510~~240			0.5357	%
Massachusetts		1,~~858~~913,~~981~~534			0.7891	%		21,~~580~~858,~~335~~981			10.0678	%
Michigan		~~591~~555,~~204~~564			0.2527	%		~~363~~591,~~570~~204			0.1525	%
Minnesota		~~908~~946,~~114~~318			0.3845	%		~~922~~908,~~025~~114			0.38	%
Mississippi		5452,~~560~~819			0.0203	%		-54,560			0.0002	%
Missouri		41,~~233~~953,~~592~~587			10.7793	%		34,~~505~~233,~~416~~592			1.4577	%
Nevada		~~696~~1,~~957~~124,018			0.2954	%		~~469~~696,~~713~~957			0.1929	%
New Jersey		1211,~~610~~308,~~602~~858			5.2640	%		1512,~~465~~610,~~715~~602			65.3826	%
New Mexico		79172,~~122~~157			0.0308	%		79,~~815~~122			0.03	%
New York		2827,~~845~~423,~~873~~733			1213.0310	%		2428,~~960~~845,~~742~~873			1012.3003	%
North Carolina		46,~~250~~479,~~466~~633			13.7709	%		54,~~975~~250,~~930~~466			21.4777	%
Ohio		109,~~048~~993,~~860~~304			4.1977	%		810,~~230~~048,~~523~~860			34.4019	%
Oklahoma		~~438~~513,~~268~~490			0.1825	%		~~739~~438,~~753~~268			0.3118	%
Oregon		~~648~~490,~~535~~002			0.2723	%		~~459~~648,~~193~~535			0.1927	%
Pennsylvania		12,~~904~~155,~~171~~957			01.7903	%		1,~~477~~904,~~938~~171			0.6179	%
Rhode Island		~~232~~750,~~866~~266			0.1036	%		~~235~~232,~~713~~866			0.10	%
South Carolina		12,~~227~~114,~~942~~480			01.5101	%		~~682~~1,~~167~~227,942			0.2851	%
Tennessee		3,863,355			1.61	%		1,865,345			0.77	%
South Dakota		162,000			0.08	%		-			0.00	%
Texas		40,130,295			16.73	%		43,134,683			17.80	%
Tennessee		1,916,828			0.92	%		3,863,355			1.61	%
Utah		409,443			0.17	%		134,668			0.06	%
Texas		34,797,777			16.62	%		40,130,295			16.73	%
Vermont		200,295			0.08	%		208,045			0.09	%
Utah		407,721			0.19	%		409,443			0.17	%
Virginia		2,307,904			0.96	%		2,013,668			0.83	%
Vermont		22,540			0.01	%		200,295			0.08	%
Washington		1,320,541			0.55	%		517,963			0.21	%
Virginia		2,486,671			1.19	%		2,307,904			0.96	%
Wisconsin		499,987			0.21	%		502,127			0.21	%
Washington		1,616,854			0.77	%		1,320,541			0.55	%
West Virginia		46,105			0.02	%		46,601			0.02	%
Wisconsin		160,167			0.08	%		499,987			0.21	%
Mortgage loan allowance		(1,164,102	)		-0.49	%		(1,120,448	)		-0.46	%
West Virginia		45,574			0.02	%		46,105			0.02	%
	$	239,831,447			100	%	$	242,314,128			100	%
Mortgage loan allowance		(1,035,965	)		-0.49	%		(1,164,102	)		-0.49	%
	$	209,364,504			100.00	%	$	239,831,447			100.00	%

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

During ~~2023~~2024, the Company foreclosed on residential mortgage loans of real estate totaling $~~764~~1,~~967~~441,287 and transferred those properties to investment real estate held for sale. During ~~2022~~2023, the Company ~~did~~foreclosed ~~not foreclose~~ on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.

The principal balances of the 1,858 residential mortgage loans owned by the Company as of December 31, 2024 that aggregated to $195,050,397 ranged from a low of $329 to a high of $2,399,053 and the interest rates ranged from 3.427% to 16.00%. The principal balances of the 37 commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans owned by the Company as of December 31, 2024 that aggregated to $14,314,107 ranged from a low of $10,682 to a high of $1,984,500 and the interest rates ranged from 6.29% to 16.01%.

The principal balances of the 1,870 residential mortgage loans owned by the Company as of December 31, 2023 that aggregated to $224,258,534 ranged from a low of $286 to a high of $1,650,000 and the interest rates ranged from 3.43% to 16.00%. The principal balances of the 37 commercial (includes agricultural, apartment, industrial, lodging, office building and retail) mortgage loans owned by the Company as of December 31, 2023 that aggregated to $15,572,913 ranged from a low of $14,478 to a high of $1,493,157 and the interest rates ranged from 5.50% to 10.51%.

~~The~~There ~~principal~~were ~~balances~~30 ~~of the 1,538 residential~~ mortgage loans ~~owned~~with ~~by the Company as of December 31, 2022 that aggregated to $223,984,194 ranged from~~ a ~~low~~remaining ofprincipal ~~$634~~balance ~~to a high~~ of $28,~~125~~120,~~911~~666 ~~and~~that ~~the~~were ~~interest~~more ~~rates~~than ~~ranged~~90 ~~from~~days ~~3.43%~~past todue ~~16.91%.~~as ~~The principal balances~~ of ~~the~~December ~~42 commercial (includes agricultural~~31, ~~apartment,~~2024. ~~industrial,~~There ~~lodging,~~were ~~office~~14 ~~building and retail)~~ mortgage loans ~~owned~~in bydefault ~~the~~and ~~Company~~in asthe ~~of December~~foreclosure ~~31,~~process ~~2022~~with ~~that aggregated to $18,329,934 ranged from~~ a ~~low~~remaining ofprincipal ~~$14,515~~balance ~~to a high~~ of $14,~~498~~111,~~063~~940 ~~and~~as ~~the~~of ~~interest~~December ~~rates~~31, ~~ranged from 5~~2024.~~97% to 10.51%.~~

There were 18 mortgage loans with a remaining principal balance of $6,043,282 that were more than 90 days past due as of December 31, 2023. There were six mortgage loans in default and in the foreclosure process with a remaining principal balance of $2,129,576 as of December 31, 2023.

There ~~were~~are 17allowances ~~mortgage~~for ~~loans~~losses ~~with~~on amortgage ~~remaining~~loans ~~principal~~of ~~balance~~$1,035,965 ofand $41,~~134~~164,~~266~~102 ~~that~~as ~~were~~of ~~more~~December ~~than~~31, 902024 ~~days~~and ~~past~~2023, ~~due~~respectively. asAs of December 31, ~~2022.~~2024, ~~There~~$754,448 ~~were~~of ~~six~~independent mortgage ~~loans~~loan inbalances ~~default~~are ~~and~~held in escrow by a third party for the ~~foreclosure~~benefit ~~process~~of the Company related to its investment in mortgage loans on real estate with aone ~~remaining~~loan ~~principal~~originator. ~~balance~~As of $2December 31,~~155~~ 2023,~~566~~ as$890,915 of ~~December~~ ~~31,~~independent ~~2022~~mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator.

There are allowances for losses on mortgage loans of $1,164,102 and $1,120,448 as of December 31, 2023 and 2022, respectively. As of December 31, 2023, $890,915 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator. As of December 31, 2022, $753,648 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator.

Investment real estate

TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $~~409~~280,000. During 2024, the company recognized an impairment loss of $129,436 from a market value appraisal that resulted in fair value estimation less than the carrying value.

FBLIC owns approximately one-half acre of undeveloped land located in Jefferson City, Missouri with a carrying value of $131,000.

During 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,441,287 and transferred those properties to investment real estate held for sale.

During 2024, the Company sold investment real estate property with an aggregate carrying value of $265,705. The Company recorded a gross realized investment gain on sale of $11,251 based on an aggregate sales price of $276,956.

During 2023, the Company foreclosed on residential mortgage loans of real estate totaling $764,967 and transferred those properties to investment real estate held for sale.

During 2022, the Company sold investment real estate property with an aggregate carrying value of $147,909. The Company recorded a gross realized investment gain on sale of $52,171 based on an aggregate sales price of $200,080.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

The Company’s investment real estate as of December 31, ~~2023~~2024 and ~~2022~~2023 is summarized as follows:

	December 31,
	2023		2022
	2024		2023
Land - held for investment	$	~~540~~411,~~436~~000	$	540,436
Residential real estate - held for sale		~~764~~1,~~967~~940,549		-764,967
Total investment in real estate	$	12,~~305~~351,~~403~~549	$	~~540~~1,~~436~~305,403

Other Long-Term Investments

The Company’s investment in ~~lottery~~co-op ~~prize~~loans ~~cash flows~~ was $61760,~~487,939~~833 ~~and $67,500,783~~ as of December 31, ~~2023~~2024. ~~and~~A ~~2022,~~co-op ~~respectively.~~ownership ~~The~~is ~~lottery~~represented ~~prize~~by ~~cash~~shares ~~flows~~of ~~are~~stock ~~assignments~~in ofa ~~the~~corporation ~~future~~that ~~rights~~owns ~~from~~the ~~lottery~~real ~~winners~~estate. ~~purchased~~Co-op atloans ause ~~discounted~~the ~~price.~~shares ~~Payments~~of onstock ~~these~~and ~~investments~~not ~~are~~the ~~made~~real byestate ~~state~~to ~~run~~secure ~~lotteries~~the debt.

The ~~amortized~~Company’s ~~cost~~investment ~~and~~in ~~estimated fair value of~~ lottery prize cash flows, bywas ~~contractual~~$57,462,681 ~~maturity~~and $61,487,939 as of December 31, 2024 and 2023, respectively. The lottery prize cash flows are ~~summarized~~assignments asof ~~follows:~~the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries.

	December 31, 2023
	Amortized Cost		Fair Value
Due in one year or less	$	13,606,873	$	13,827,135
Due in one year through five years		32,445,768		34,786,621
Due after five years through ten years		10,536,206		12,493,922
Due after ten years		4,899,092		6,916,039
	$	61,487,939	$	68,023,717

The amortized cost and estimated fair value of lottery prize cash flows, by contractual maturity, as of December 31, 2024 are summarized as follows:

	December 31, 2024
	Amortized Cost		Fair Value
Due in one year or less	$	13,582,946	$	13,727,065
Due in one year through five years		28,887,987		30,563,019
Due after five years through ten years		9,991,780		11,512,044
Due after ten years		4,999,968		6,499,102
	$	57,462,681	$	62,301,230

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

2. Investments (continued)

The outstanding balance of lottery prize cash flows, by state lottery, as of December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	December 31, 2023					December 31, 2022
	December 31, 2024					December 31, 2023
	Amount		Percentage			Amount		Percentage
Arizona	$	~~301~~255,~~299~~903		0.4945	%	$	~~343~~301,~~698~~299		0.5149	%
California		76,~~327~~366,~~724~~945		11.9208	%		7,~~891~~327,~~340~~724		11.6992	%
Connecticut		2,~~285~~600,~~266~~183		34.7252	%		2,~~334~~285,~~369~~266		3.4672	%
Florida		~~529~~3,~~803~~304,344		05.8675	%		~~851~~529,~~727~~803		10.2686	%
Georgia		3,~~947~~316,~~186~~521		65.4277	%		53,~~249~~947,~~187~~186		76.7842	%
Illinois		23,~~587~~323,~~537~~336		45.2178	%		12,~~422~~587,~~002~~537		24.1121	%
Indiana		43,~~229~~675,~~571~~764		6.8840	%		4,~~852~~229,~~536~~571		76.1988	%
Maine		-		0.00	%		40,686		0.06	%
Massachusetts		10,772,405		18.75	%		13,632,982		22.17	%
Massachusetts		13,632,982		22.17	%		14,736,084		21.83	%
Michigan		168,551		0.29	%		190,457		0.31	%
Michigan		190,457		0.31	%		210,900		0.31	%
Missouri		51,776		0.09	%		62,782		0.10	%
Missouri		62,782		0.10	%		73,107		0.11	%
New Jersey		35,894		0.06	%		68,823		0.11	%
New Jersey		68,823		0.11	%		99,031		0.15	%
New York		16,430,600		28.59	%		19,004,811		30.90	%
New York		19,004,811		30.90	%		20,785,835		30.78	%
Ohio		4,177,016		7.27	%		3,755,995		6.11	%
Ohio		3,755,995		6.11	%		4,092,128		6.06	%
Oregon		15,253		0.03	%		29,272		0.05	%
Oregon		29,272		0.05	%		42,158		0.06	%
Pennsylvania		728,145		1.27	%		935,798		1.52	%
Pennsylvania		935,798		1.52	%		1,522,210		2.26	%
Texas		1,421,319		2.47	%		1,774,744		2.89	%
Texas		1,774,744		2.89	%		1,997,313		2.96	%
Virginia		-		0.00	%		17,774		0.03	%
Virginia		17,774		0.03	%		33,506		0.05	%
Vermont		571,856		1.00	%		550,235		0.89	%
Vermont		550,235		0.89	%		658,585		0.98	%
Washington		246,870		0.43	%		255,880		0.42	%
Washington		255,880		0.42	%		264,381		0.39	%
	$	57,462,681		100.00	%	$	61,487,939		100.00	%
	$	61,487,939		100.00	%	$	67,500,783		100.00	%

Major categories of net investment income for the years ended December 31, ~~2023~~2024 and ~~2022~~2023 are summarized as follows:

	Years Ended December 31,
	2023			2022
	2024			2023
Fixed maturity securities	$	68,~~550~~534,~~360~~951		$	76,~~061~~550,~~501~~360
Equity securities		~~118~~135,~~780~~911			~~211~~118,~~290~~780
Other long-term investments		4,~~948~~444,~~734~~639			4,~~975~~948,~~205~~734
Mortgage loans		1917,~~678~~079,~~014~~731			1619,~~850~~678,~~320~~014
Policy loans		~~240~~291,~~385~~170			~~194~~240,~~814~~385
Short-term and other investments		2,~~600~~531,~~099~~767			~~243~~2,~~315~~600,099
Gross investment income		3433,~~136~~018,~~372~~169			2934,~~536~~136,~~445~~372
Investment expenses		(2,~~481~~495,~~051~~589	)		(32,~~315~~481,~~273~~051	)
Net investment income	$	3130,~~655~~522,~~321~~580		$	2631,~~221~~655,~~172~~321

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

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 ~~and certificate of deposits~~.

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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

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 December 31, ~~2023~~2024 and ~~2022~~2023 is summarized as follows:

	Level 1		Level 2		Level 3		Total
	December 31, 2023
	December 31, 2024
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	34,~~798~~275,~~284~~965	$	-	$	34,~~798~~275,~~284~~965
States and political subdivisions		-		97,~~531~~693,~~870~~233		-		97,~~531~~693,~~870~~233
U.S. government agency mortgage backed securities		-		1040,~~306~~235,~~464~~381		-		1040,~~306~~235,~~464~~381
Commercial mortgage-backed securities		-		818,~~471~~499,~~538~~398		-		818,~~471~~499,~~538~~398
Residential mortgage-backed securities		-		14,~~314~~111		-		14,~~314~~111
Corporate bonds		-		7999,~~341~~356,~~307~~554		-		7999,~~341~~356,~~307~~554
Asset-backed securities		-		1114,~~492~~898,~~496~~584		-		1114,~~492~~898,~~496~~584
Exchange traded securities		-		~~476~~496,~~000~~800		-		~~476~~496,~~000~~800
Foreign bonds		-		2527,~~212~~239,~~675~~795		-		2527,~~212~~239,~~675~~795
Redeemable preferred securities		-		1,~~056~~036,000		-		1,~~056~~036,000
Total fixed maturity securities	$	-	$	~~149~~213,~~700~~745,~~948~~821	$	-	$	~~149~~213,~~700~~745,~~948~~821
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	5117,~~651~~932,~~259~~297	$	-	$	5117,~~651~~932,~~259~~297
Equity securities
Mutual funds	$	-	$	5048,~~226~~375	$	-	$	5048,~~226~~375
Corporate common stock		~~304~~232,~~064~~365		-4,999,414		6555,~~240~~908		~~369~~5,~~304~~287,687
Total equity securities	$	~~304~~232,~~064~~365	$	505,~~226~~047,789	$	6555,~~240~~908	$	~~419~~5,~~530~~336,062

	December 31, 2022
	December 31, 2023
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	23,~~054~~798,~~565~~284	$	-	$	23,~~054~~798,~~565~~284
States and political subdivisions		-		49,~~560~~531,~~321~~870		-		49,~~560~~531,~~321~~870
Commercial mortgage-backed securities		-		8,333,638		-		8,333,638
U.S. government agency mortgage backed securities		-		10,306,464		-		10,306,464
Residential mortgage-backed securities		-		15,250		-		15,250
Commercial mortgage-backed securities		-		8,471,538		-		8,471,538
Corporate bonds		-		78,112,137		-		78,112,137
Residential mortgage-backed securities		-		14,314		-		14,314
Asset-backed securities		-		7,999,429		-		7,999,429
Corporate bonds		-		79,341,307		-		79,341,307
Exchange traded securities		-		467,200		-		467,200
Asset-backed securities		-		11,492,496		-		11,492,496
Foreign bonds		-		23,770,080		-		23,770,080
Exchange traded securities		-		476,000		-		476,000
Redeemable preferred securities		-		1,101,200		-		1,101,200
Foreign bonds		-		25,212,675		-		25,212,675
Certificate of deposit		-		199,070		-		199,070
Redeemable preferred securities		-		1,056,000		-		1,056,000
Total fixed maturity securities	$	-	$	~~126~~149,~~612~~700,~~890~~948	$	-	$	~~126~~149,~~612~~700,~~890~~948
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	5651,~~209~~651,~~040~~259	$	-	$	5651,~~209~~651,~~040~~259
Equity securities
Mutual funds	$	-	$	4750,~~910~~226	$	-	$	4750,~~910~~226
Corporate common stock		~~297~~304,~~727~~064		-		5365,~~996~~240		~~351~~369,~~723~~304
Total equity securities	$	~~297~~304,~~727~~064	$	4750,~~910~~226	$	5365,~~996~~240	$	~~399~~419,~~633~~530

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

3. Fair Value Measurements (continued)

As of December 31, ~~2023~~2024 and ~~2022~~2023, Level 3 financial instruments consisted of a private placement common stock that has no active trading and a 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 investment with a mortgage loan originator is 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 securities 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 ~~and certificate of deposits~~.

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 years ended December 31, ~~2023~~2024 and ~~2022~~2023 is summarized as follows:

	December 31,
	2023			2022
	2024			2023
Beginning balance	$	5365,~~996~~240		$	6353,~~423~~996
Joint venture net income		~~130~~106,~~550~~039			~~215~~130,~~470~~550
Joint venture distribution		(~~119~~115,~~306~~371	)		(~~216~~119,~~897~~306	)
Net realized investment losses		-			~~(8,000~~-	)
Ending balance	$	6555,~~240~~908		$	5365,~~996~~240

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

3. Fair Value Measurements (continued)

Fair Value of Financial Instruments

The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of December 31, ~~2023~~2024 and ~~2022~~2023, and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:

	Carrying			Fair
	Amount			Value			Level 1			Level 2		Level 3
	December 31, 2023
	December 31, 2024
Financial assets
Mortgage loans on real estate
Commercial	$	1514,~~572~~314,~~913~~107		$	14,~~803,~~724,122		$	-		$	-	$	14,~~803,~~724,122
Residential		~~224~~195,~~258~~050,~~534~~397			~~196~~211,~~514~~590,~~414~~742			-			-		~~196~~211,~~514~~590,~~414~~742
Policy loans		34,~~474~~367,~~116~~534			34,~~474~~367,~~116~~534			-			-		34,~~474~~367,~~116~~534
Short-term investments		298,257			298,257			298,257			-		-
Other long-term investments		58,223,514			63,062,063			-			-		63,062,063
Other long-term investments		61,487,939			68,023,717			-			-		68,023,717
Cash and cash equivalents		64,344,122			64,344,122			64,344,122			-		-
Cash and cash equivalents		33,839,741			33,839,741			33,839,741			-		-
Accrued investment income		5,746,167			5,746,167			-			-		5,746,167
Accrued investment income		6,214,459			6,214,459			-			-		6,214,459
Total financial assets	$	342,045,841		$	363,834,750		$	64,344,122		$	-	$	299,490,628
Total financial assets	$	345,145,959		$	323,168,428		$	34,137,998		$	-	$	289,030,430
Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial	$	2712,~~714~~660,~~891~~117		$	2712,~~714~~660,~~891~~117		$	-		$	-	$	2712,~~714~~660,~~891~~117
Less unearned interest on mortgage loans		133,010			133,010			-			-		133,010
Overdraft		(89,726	)		(89,726	)		(89,726	)		-		-
Cash and cash equivalents		711,733			711,733			711,733			-		-
Total financial assets held in trust under coinsurance agreement	$	12,570,391		$	12,570,391		$	(89,726	)	$	-	$	12,660,117
Total financial assets held in trust under coinsurance agreement	$	28,293,614		$	28,293,614		$	711,733		$	-	$	27,581,881
Financial liabilities
Policyholders' account balances	$	~~391~~431,~~247~~190,~~676~~092		$	~~344~~365,~~806~~288,~~580~~900		$	-		$	-	$	~~344~~365,~~806~~288,~~580~~900
Policy claims		2,~~410~~478,~~243~~465			2,~~410~~478,~~243~~465			-			-		2,~~410~~478,~~243~~465
Total financial liabilities	$	~~393~~433,~~657~~668,~~919~~557		$	~~347~~367,~~216~~767,~~823~~365		$	-		$	-	$	~~347~~367,~~216~~767,~~823~~365

	December 31, 2022
	December 31, 2023
Financial assets
Mortgage loans on real estate
Commercial	$	1815,~~329~~572,~~934~~913	$	1714,~~393~~803,~~284~~724	$	-	$	-	$	1714,~~393~~803,~~284~~724
Residential		~~223~~224,~~984~~258,~~194~~534		~~202~~196,~~476~~514,~~647~~414		-		-		~~202~~196,~~476~~514,~~647~~414
Policy loans		23,~~840~~474,~~887~~116		23,~~840~~474,~~887~~116		-		-		23,~~840~~474,~~887~~116
Short-term investments		1298,~~860,578~~257		1298,~~860,578~~257		1298,~~860,578~~257		-		-
Other long-term investments		6761,~~500~~487,~~783~~939		7468,~~155~~023,~~822~~717		-		-		7468,~~155~~023,~~822~~717
Cash and cash equivalents		33,~~542~~839,~~725~~741		33,~~542~~839,~~725~~741		33,~~542~~839,~~725~~741		-		-
Accrued investment income		56,~~580~~214,~~175~~459		56,~~580~~214,~~175~~459		-		-		56,~~580~~214,~~175~~459
Total financial assets	$	~~353~~345,~~639~~145,~~276~~959	$	~~337~~323,~~850~~168,~~118~~428	$	3534,~~403~~137,~~303~~998	$	-	$	~~302~~289,~~446~~030,~~815~~430
Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial	$	3127,~~076~~714,~~883~~891	$	3127,~~076~~714,~~883~~891	$	-	$	-	$	3127,~~076~~714,~~883~~891
Less unearned interest on mortgage loans		48133,~~308~~010		48133,~~308~~010		-		-		48133,~~308~~010
Short-term investments		982,404		982,404		982,404		-		-
Cash and cash equivalents		711,733		711,733		711,733		-		-
Cash and cash equivalents		3,813,750		3,813,750		3,813,750		-		-
Total financial assets held in trust under coinsurance agreement	$	28,293,614	$	28,293,614	$	711,733	$	-	$	27,581,881
Total financial assets held in trust under coinsurance agreement	$	35,824,729	$	35,824,729	$	4,796,154	$	-	$	31,028,575
Financial liabilities
Policyholders' account balances	$	391,~~359~~247,~~944~~676	$	~~359~~344,~~044~~806,~~740~~580	$	-	$	-	$	~~359~~344,~~044~~806,~~740~~580
Policy claims		2,~~541~~410,~~088~~243		2,~~541~~410,~~088~~243		-		-		2,~~541~~410,~~088~~243
Total financial liabilities	$	393,~~901~~657,~~032~~919	$	~~361~~347,~~585~~216,~~828~~823	$	-	$	-	$	~~361~~347,~~585~~216,~~828~~823

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

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 Securities 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 ~~as of December 31, 2023 and 2022~~.

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 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. Special Deposits

TLIC and FBLIC are required to hold assets on deposit for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of December 31, ~~2023~~2024 and ~~2022~~2023, these required deposits had amortized costs that totaled $46,~~609~~740,~~927~~988 and $4,~~634~~609,~~898~~927, respectively. As of December 31, ~~2023~~2024 and ~~2022~~2023, these required deposits had fair values that totaled $46,~~596~~735,~~130~~209 and $4,~~590~~596,~~193~~130, respectively.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, ~~2023~~2024 and ~~2022~~ 2023

5. Allowance for Loan Losses from Mortgage Loans on Real Estate

As of December 31, 2024, $754,448 of independent residential mortgage loans on real estate are held in escrow by a third party for the benefit of the Company. As of December 31, 2024, $738,411 of that escrow amount is available to the Company as additional collateral on $4,746,638 of advances to the loan originator. The remaining December 31, 2024 escrow amount of $16,037 is available to the Company as additional collateral on its investment of $3,207,399 in mortgage loans on real estate. In addition, the Company has an additional $1,035,965 allowance for possible loan losses in the remaining $206,157,105 of investments in mortgage loans on real estate as of December 31, 2024.

As of December 31, 2023, $890,915 of independent residential mortgage loans on real estate are held in escrow by a third party for the benefit of the Company. As of December 31, 2023, $850,039 of that escrow amount is available to the Company as additional collateral on $4,487,715 of advances to the loan originator. The remaining December 31, 2023 escrow amount of $40,876 is available to the Company as additional collateral on its investment of $8,175,212 in mortgage loans on real estate. In addition, the Company has an additional $1,164,102 allowance for possible loan losses in the remaining $231,656,235 of investments in mortgage loans on real estate as of December 31, 2023.

As of December 31, ~~2022~~2024, ~~$753,648 of independent residential mortgage loans on real estate are held in escrow by a third party for~~ the ~~benefit of the~~ Company~~. As~~’s ~~of December 31~~Chairman, ~~2022,~~President ~~$656,924~~and ofChief ~~that~~Executive ~~escrow~~Officer ~~amount~~

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