First Trinity Financial (FTFC) 10-Q 2024 Q3 Quarterly report

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934

For the quarterly period ended September 30, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period From _____________to ______________ .

Commission file number: 000-52613

FIRST TRINITY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Oklahoma	34-1991436
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

7633 East 63rd Place, Suite 230

Tulsa, Oklahoma 74133-1246

(Address of principal executive offices)

(918) 249-2438

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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:  ☐	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 check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes ☐       No ☑

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 11, 2024, the registrant had 9,384,340 shares of Class A common stock, .01 par value, outstanding and 101,102 shares of Class B common stock, .01 par value, outstanding.

Securities registered pursuant to section 12(b) of the Act: None.

FIRST TRINITY FINANCIAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page Number
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Position as of September 30, 2024 (Unaudited) and December 31, 2023	3
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	4
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	5
Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 4. Controls and Procedures	65
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. Defaults upon Senior Securities	66
Item 4. Mine Safety Disclosures	66
Item 5. Other Information	67
Item 6. Exhibits	67
Signatures	68
Exhibit No. 31.1
Exhibit No. 31.2
Exhibit No. 32.1
Exhibit No. 32.2
Exhibit No. 101.INS
Exhibit No. 101.SCH
Exhibit No. 101.CAL
Exhibit No. 101.DEF
Exhibit No. 101.LAB
Exhibit No. 101.PRE

2

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Financial Position

	(Unaudited)
	September 30, 2024			December 31, 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $200,067,578 and $161,908,230 as of September 30, 2024 and December 31, 2023, respectively)	$	192,537,067		$	149,700,948
Equity securities at fair value (cost: $282,037 and $287,375 as of September 30, 2024 and December 31, 2023, respectively)		379,606			419,530
Mortgage loans on real estate		206,029,021			239,831,447
Investment real estate		2,452,094			1,305,403
Policy loans		4,067,802			3,474,116
Short-term investments		751,349			298,257
Other long-term investments		59,366,184			61,487,939
Total investments		465,583,123			456,517,640
Cash and cash equivalents		65,104,323			33,839,741
Accrued investment income		5,428,561			6,214,459
Recoverable from reinsurers		9,992,701			10,353,674
Assets held in trust under coinsurance agreement
Available-for-sale fixed maturity securities at fair value (amortized cost: $23,886,882 and $56,824,160 as of September 30, 2024 and December 31, 2023, respectively)		20,092,037			51,651,259
Mortgage loans on real estate		12,553,789			27,581,881
Payable for securities		(11,361	)		(4,414	)
Cash and cash equivalents		1,947,947			711,733
Total assets held in trust under coinsurance agreement		34,582,412			79,940,459
Agents' balances and due premiums		1,401,266			1,284,003
Deferred policy acquisition costs		65,038,520			60,795,108
Value of insurance business acquired		3,635,480			3,777,353
Other assets		15,693,785			19,299,098
Total assets	$	666,460,171		$	672,021,535
Liabilities and Shareholders' Equity
Policy liabilities
Policyholders' account balances	$	397,299,695		$	391,247,676
Future policy benefits		133,670,392			123,729,530
Policy claims		2,530,121			2,410,243
Other policy liabilities		255,598			250,294
Total policy liabilities		533,755,806			517,637,743
Funds withheld under coinsurance agreement		33,686,270			77,257,253
Deferred federal income taxes		5,916,337			4,228,189
Other liabilities		20,278,198			8,882,142
Total liabilities		593,636,611			608,005,327
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of September 30, 2024 and December 31, 2023, 9,631,920 issued as of September 30, 2024 and December 31, 2023, 9,384,340 outstanding as of September 30, 2024 and December 31, 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 September 30, 2024 and December 31, 2023)		1,011			1,011
Additional paid-in capital		43,668,023			43,668,023
Treasury stock, at cost (247,580 shares as of September 30, 2024 and December 31, 2023)		(893,947	)		(893,947	)
Accumulated other comprehensive loss		(5,959,373	)		(9,641,308	)
Accumulated earnings		35,911,527			30,786,110
Total shareholders' equity		72,823,560			64,016,208
Total liabilities and shareholders' equity	$	666,460,171		$	672,021,535

See notes to consolidated financial statements

3

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues
Premiums	$	10,794,062		$	9,973,566		$	30,747,471		$	28,681,414
Net investment income		7,869,167			8,185,934			23,495,461			23,260,146
Net realized investment gains (losses)		(95,174	)		23,387			(215,078	)		(120,134	)
Loss on impairments		-			-			(129,436	)		-
Service fees		810,027			1,437,116			1,556,193			3,530,958
Other income		43,439			631,074			652,248			639,507
Total revenues		19,421,521			20,251,077			56,106,859			55,991,891
Benefits, Claims and Expenses
Benefits and claims
Increase in future policy benefits		3,731,925			3,733,264			10,148,709			10,216,279
Death benefits		3,049,217			3,235,121			9,930,857			10,344,418
Surrenders		693,011			489,729			1,852,209			1,590,861
Interest credited to policyholders		3,984,360			3,876,088			11,252,165			11,298,057
Dividend, endowment and supplementary life contract benefits		95,907			87,733			276,565			256,515
Total benefits and claims		11,554,420			11,421,935			33,460,505			33,706,130
Policy acquisition costs deferred		(4,757,508	)		(2,987,689	)		(12,024,147	)		(10,387,913	)
Amortization of deferred policy acquisition costs		2,767,806			2,189,089			7,764,643			6,468,779
Amortization of value of insurance business acquired		46,697			65,288			141,873			206,787
Commissions		4,773,779			2,962,287			11,586,116			9,955,977
Other underwriting, insurance and acquisition expenses		2,647,431			2,553,166			8,723,029			8,848,007
Total expenses		5,478,205			4,782,141			16,191,514			15,091,637
Total benefits, claims and expenses		17,032,625			16,204,076			49,652,019			48,797,767
Income before total federal income tax expense		2,388,896			4,047,001			6,454,840			7,194,124
Current federal income tax expense		223,012			912,430			620,019			1,167,431
Deferred federal income tax expense (benefit)		224,600			(48,657	)		709,404			326,460
Total federal income tax expense		447,612			863,773			1,329,423			1,493,891
Net income	$	1,941,284		$	3,183,228		$	5,125,417		$	5,700,233
Net income per common share
Class A common stock	$	0.2050		$	0.3361		$	0.5412		$	0.6019
Class B common stock	$	0.1742		$	0.2857		$	0.4600		$	0.5116

See notes to consolidated financial statements (unaudited).

4

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net income	$	1,941,284		$	3,183,228		$	5,125,417		$	5,700,233
Other comprehensive income (loss)
Total net unrealized investment gains (losses) arising during the period		6,221,678			(4,553,047	)		4,628,316			(2,841,164	)
Less net realized investment gains (losses) having no credit losses		(4,342	)		15,512			(48,455	)		(34,091	)
Net unrealized investment gains (losses)		6,226,020			(4,568,559	)		4,676,771			(2,807,073	)
Less adjustment to deferred acquisition costs		16,186			(1,068	)		16,092			(340	)
Other comprehensive income (loss) before federal income tax expense (benefit)		6,209,834			(4,567,491	)		4,660,679			(2,806,733	)
Federal income tax expense (benefit)		1,304,066			(959,172	)		978,744			(589,413	)
Total other comprehensive income (loss)		4,905,768			(3,608,319	)		3,681,935			(2,217,320	)
Total comprehensive income (loss)	$	6,847,052		$	(425,091	)	$	8,807,352		$	3,482,913

See notes to consolidated financial statements (unaudited).

5

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited)

	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			loss			Earnings			Equity
Three months ended September 30, 2023
Balance as of July 1, 2023	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(12,698,644	)	$	25,387,754		$	55,560,516
Comprehensive income (loss):
Net income		-		-		-		-			-			3,183,228			3,183,228
Other comprehensive loss		-		-		-		-			(3,608,319	)		-			(3,608,319	)
Balance as of September 30, 2023	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(16,306,963	)	$	28,570,982		$	55,135,425
Nine months ended September 30, 2023
Balance as of January 1, 2023	$	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 (loss):
Net income		-		-		-		-			-			5,700,233			5,700,233
Other comprehensive loss		-		-		-		-			(2,217,320	)		-			(2,217,320	)
Balance as of September 30, 2023	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(16,306,963	)	$	28,570,982		$	55,135,425
Three months ended September 30, 2024
Balance as of July 1, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(10,865,141	)	$	33,970,243		$	65,976,508
Comprehensive income:
Net income		-		-		-		-			-			1,941,284			1,941,284
Other comprehensive income		-		-		-		-			4,905,768			-			4,905,768
Balance as of September 30, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(5,959,373	)	$	35,911,527		$	72,823,560
Nine months ended September 30, 2024
Balance as of January 1, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(9,641,308	)	$	30,786,110		$	64,016,208
Comprehensive income:
Net income		-		-		-		-			-			5,125,417			5,125,417
Other comprehensive income		-		-		-		-			3,681,935			-			3,681,935
Balance as of September 30, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(5,959,373	)	$	35,911,527		$	72,823,560

See notes to consolidated financial statements (unaudited).

6

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows 

(Unaudited) 

	Nine Months Ended September 30,
	2024			2023
Operating activities
Net income	$	5,125,417		$	5,700,233
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on investments		(3,496,337	)		(3,693,889	)
Net realized investment losses		215,078			120,134
Loss on impairments		129,436			-
Amortization of policy acquisition cost		7,764,643			6,468,779
Policy acquisition cost deferred		(12,024,147	)		(10,387,913	)
Amortization of value of insurance business acquired		141,873			206,787
Allowance for mortgage loan losses		(145,249	)		17,222
Provision for deferred federal income tax expense		709,404			326,460
Interest credited to policyholders		11,252,165			11,298,057
Change in assets and liabilities:
Accrued investment income		785,898			(1,453,997	)
Recoverable from reinsurers		360,973			668,024
Funds under coinsurance agreement		48,503,962			10,567,881
Agents' balances and due premiums		(117,263	)		(113,357	)
Other assets (excludes change in receivable for securities of ($5,002,173) and ($19,113) in 2024 and 2023, respectively)		8,607,486			(1,801,885	)
Future policy benefits		9,940,862			9,807,021
Policy claims		119,878			(641,655	)
Other policy liabilities		5,304			152,207
Other liabilities (excludes change in payable for securities purchased of ($1,750) and ($144,391 in 2024 and 2023, respectively)		11,397,806			(8,494,671	)
Net cash provided by operating activities		89,277,189			18,745,438
Investing activities
Purchases of fixed maturity securities		(44,428,047	)		(23,059,489	)
Maturities of fixed maturity securities		3,235,000			505,000
Sales of fixed maturity securities		2,882,457			4,428,942
Purchases of equity securities		(67,936	)		(104,047	)
Sale of equity securities		5			-
Joint venture distributions		73,265			100,164
Purchases of mortgage loans		(72,776,142	)		(101,131,636	)
Payments on mortgage loans		105,475,704			105,515,062
Purchases of other long-term investments		(5,589,676	)		(6,109,759	)
Payments on other long-term investments		11,137,871			14,300,767
Sale of real estate		12,637			-
Net change in policy loans		(593,686	)		(405,279	)
Net change in short-term investments		(453,092	)		1,565,404
Net change in receivable and payable for securities sold and purchased		(5,003,923	)		(163,504	)
Net cash used in investing activities		(6,095,563	)		(4,558,375	)
Financing activities
Policyholders' account deposits		99,736,795			66,492,731
Policyholders' account withdrawals		(151,653,839	)		(76,096,655	)
Net cash used in financing activities		(51,917,044	)		(9,603,924	)
Increase in cash and cash equivalents		31,264,582			4,583,139
Cash and cash equivalents, beginning of period		33,839,741			33,542,725
Cash and cash equivalents, end of period	$	65,104,323		$	38,125,864

See notes to consolidated financial statements (unaudited).

7

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

Supplemental Disclosure – Cash and Non-Cash Impact on Investing Activities

(Unaudited)

During the Nine months ended September 30, 2024, the Company foreclosed on residential mortgage loans of real estate totaling $1,285,621 and transferred that 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:

	Nine Months Ended
	September 30, 2024
Reductions in mortgage loans due to foreclosure	$	1,285,621
Investment real estate held-for-sale acquired through foreclosure		(1,285,621	)
Net cash used in investing activities	$	-

See notes to consolidated financial statements (unaudited).

8

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies

Nature of Operations

First Trinity Financial Corporation (the “Company” or “FTFC”) is the parent holding company of Trinity Life Insurance Company (“TLIC”), Family Benefit Life Insurance Company (“FBLIC”), Trinity Mortgage Corporation (“TMC”) and Trinity American, Inc. (“TAI”). The Company was incorporated in Oklahoma on April 19, 2004, for the primary purpose of organizing a life insurance subsidiary.

The Company owns 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.

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 of America (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 and annuity contracts through an association with distribution channels but is now issuing life insurance policies and annuity contracts. The Company’s acquisition of TAI was formally approved by Barbados regulators and the certifications were received in 2019.

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.

The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital.

In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of Class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to common stock and additional paid-in capital.

The Company has also purchased 247,580 shares of treasury stock at a cost of $893,947 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.

9

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

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 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, 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. 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 unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.

The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's report on Form 10-K for the year ended December 31, 2023.

10

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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.

Fixed maturity securities comprised of bonds and redeemable preferred securities are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity.

Interest income on fixed maturity securities, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. Dividend income on redeemable preferred securities are recognized in net investment income when declared. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline in value is considered to be other-than-temporary.

The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings. 

The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency ratings, the financial condition of the issuer or underlying obligors, payment history, payment structure of the security, industry and market conditions, underlying collateral, and other factors that may be relevant based on the facts and circumstances pertaining to individual securities.

If the Company intends to sell the fixed maturity security or will be more likely than not be required to sell the fixed maturity security before recovery of its amortized cost basis, then any allowance for credit losses, if previously recorded is written off and the fixed maturity security’s amortized cost is written down to the security’s fair value as of the reporting date with any incremental impairment recorded as a charge to noninterest income.

Equity securities are comprised of mutual funds and common stocks and are carried at fair value. The associated unrealized gains and losses are included in net realized investment gains (losses). Dividends from these investments are recognized in net investment income when declared.

Mortgage loans are carried at unpaid balances, net of unamortized premium or discounts. This measurement of mortgage loans on an amortized cost basis is reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized costs basis of mortgage loans to present the net carrying value at the amount expected to be collected on the mortgage loans.

Interest income and the amortization of premiums or discounts are included in net investment income. Mortgage loan fees, certain direct loan origination costs, and purchase premiums and discounts on loans are recognized as an adjustment of yield by the interest method based on the contractual terms of the loan. In certain circumstances, prepayments may be anticipated.

11

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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.

While the Company utilizes its best judgment and information available, the ultimate adequacy of this allowance is dependent upon a variety of factors beyond our control, including the performance of the residential and commercial mortgage loan portfolio, the economy and changes in interest rates. The allowance for possible mortgage loan losses consists of specific valuation allowances established for probable losses on specific loans and a portfolio reserve for probable incurred but not specifically identified loans.

The Company considers mortgage loans on real estate impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the mortgage loan agreement. Impairment is measured on a loan-by-loan basis. Factors that the Company considers in determining impairment include payment status, collateral value of the real estate subject to the mortgage loan and the probability of collecting scheduled principal and interest payments when due. Mortgage loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the mortgage loan on real estate and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Investment real estate in land held for both the production of income and for sale is carried at cost. Investment real estate obtained through foreclosure on mortgage loans on real estate is carried at the lower of acquisition cost or net realizable value.

Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.

Other long-term investments are comprised of lottery prize receivables and are carried at amortized cost. Interest income and the accretion of discount are included in net investment income. These investments are backed by the lottery departments at the various states by U.S. Treasury Bonds and Notes or in the case of Pennsylvania, by annuities purchased from a highly rated life insurance company. Given this support to lottery prize receivables, the Company has not recorded and does not expect to incur any current estimated credit losses on its investments in lottery prize receivables.

Principles of Consolidation

The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

12

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

Reclassifications

Certain reclassifications have been made in the prior year and prior quarter financial statements to conform to current year and current quarter classifications. These reclassifications had no effect on previously reported net income or shareholders' equity.

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.

Funds Withheld Coinsurance

In accordance with an annuity coinsurance agreement with an offshore annuity and life insurance company, TLIC holds assets and recognizes a funds withheld liability for the benefit of the assuming company in an amount at least equal to the annuity reserves in accordance with U.S. statutory accounting principles generated by this ceded business. In addition, the assuming company maintains a trust related to this ceded business amounting to at least an additional 4% of assets above the annuity reserve required under U.S. statutory accounting principles. This coinsurance agreement may be terminated for new business by either party at any time upon 30 days prior written notice to the other party.

In addition, in accordance with this annuity coinsurance agreement, investment income, investment expenses, other income and other expenses earned or incurred in relation to the operations of this annuity coinsurance agreement are not reported on the Company’s Consolidated Statements of Operations. The unrealized appreciation (depreciation) of fixed available-for-sale fixed maturity securities and the related income tax expense (benefit) is not reported as accumulated other comprehensive income in the shareholders’ equity section of the Company’s Consolidated Statements of Financial Position. Correspondingly, the net unrealized gains (losses) arising during the period, the net realized gains (losses) having no credit gains (losses) and the related income tax expense (benefit) associated with the available-for-sale fixed maturities held under this coinsurance agreement are not included in the computation of total other comprehensive income (loss) in the Company’s Consolidated Statement of Comprehensive 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.

13

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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 September 30, 2024 through the date that these financial statements have been issued.

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.

14

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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.

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.

15

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing this Update for year-end reporting in 2025.

16

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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 September 30, 2024 Form 10-Q.

17

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments

Investments in fixed maturity available-for-sale as of September 30, 2024 and December 31, 2023 are summarized as follows:

			Gross		Gross
	Amortized Cost		Unrealized		Unrealized		Fair
	or Cost		Gains		Losses		Value
	September 30, 2024 (Unaudited)
Fixed maturity securities
U.S. government and U.S. government agencies	$	3,842,947	$	34,269	$	-	$	3,877,216
States and political subdivisions		9,123,812		137,836		222,884		9,038,764
U.S. government agency mortgage backed securities		33,624,212		473,278		1,801		34,095,689
Commercial mortgage-backed securities		16,554,830		55,545		1,384,908		15,225,467
Residential mortgage-backed securities		9,918		4,660		-		14,578
Corporate bonds		90,188,897		338,042		4,542,477		85,984,462
Asset-backed securities		14,822,309		92,995		616,261		14,299,043
Exchange traded securities		1,097,104		-		611,104		486,000
Foreign bonds		29,553,549		102,023		1,196,724		28,458,848
Redeemable preferred securities		1,250,000		-		193,000		1,057,000
Total fixed maturity securities	$	200,067,578	$	1,238,648	$	8,769,159	$	192,537,067
Fixed maturity securities held in trust under coinsurance agreement	$	23,886,882	$	20,805	$	3,815,650	$	20,092,037
	December 31, 2023
Fixed maturity securities
U.S. government and U.S. government agencies	$	3,806,419	$	14,360	$	22,495	$	3,798,284
States and political subdivisions		9,773,549		97,215		338,894		9,531,870
U.S. government agency mortgage backed securities		10,097,479		208,985		-		10,306,464
Commercial mortgage-backed securities		10,629,003		-		2,157,465		8,471,538
Residential mortgage-backed securities		9,986		4,328		-		14,314
Corporate bonds		85,901,454		65,239		6,625,386		79,341,307
Asset-backed securities		12,466,601		43,424		1,017,529		11,492,496
Exchange traded securities		882,631		-		406,631		476,000
Foreign bonds		27,091,108		24,186		1,902,619		25,212,675
Redeemable preferred securities		1,250,000		-		194,000		1,056,000
Total fixed maturity securities	$	161,908,230	$	457,737	$	12,665,019	$	149,700,948
Fixed maturity securities held in trust under coinsurance agreement	$	56,824,160	$	53,496	$	5,226,397	$	51,651,259

18

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

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 September 30, 2024 and December 31, 2023 are summarized as follows:

			Unrealized		Number of
	Fair Value		Loss		Securities
	September 30, 2024 (Unaudited)
Fixed maturity securities
Less than 12 months in an unrealized loss position
States and political subdivisions	$	617,044	$	7,956		1
U.S. government agency mortgage backed securities		2,172,407		1,801		3
Corporate bonds		2,567,594		29,052		10
Redeemable preferred securities		675,000		75,000		2
Foreign bonds		301,344		2,214		1
Total less than 12 months in an unrealized loss position		6,333,389		116,023		17
More than 12 months in an unrealized loss position
States and political subdivisions		3,260,592		214,928		18
Commercial mortgage-backed securities		9,262,256		1,384,908		24
Corporate bonds		66,349,701		4,513,425		187
Asset-backed securities		7,462,253		616,261		20
Exchange traded securities		486,000		611,104		2
Redeemable preferred securities		382,000		118,000		2
Foreign bonds		21,903,919		1,194,510		57
Total more than 12 months in an unrealized loss position		109,106,721		8,653,136		310
Total fixed maturity securities in an unrealized loss position	$	115,440,110	$	8,769,159		327
Fixed maturity securities held in trust under coisnurance agreement
Total less than 12 months in an unrealized loss position	$	1,398,148	$	1,852		2
Total more than 12 months in an unrealized loss position		17,414,010		3,813,798		74
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	18,812,158	$	3,815,650		76
	December 31, 2023
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies	$	231,010	$	100		1
States and political subdivisions		120,734		588		1
Corporate bonds		3,762,988		78,589		14
Foreign bonds		502,835		8,573		2
Total less than 12 months in an unrealized loss position		4,617,567		87,850		18
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		4,411,017		338,306		21
Commercial mortgage-backed securities		8,471,538		2,157,465		24
Corporate bonds		72,550,042		6,546,797		214
Asset-backed securities		7,390,830		1,017,529		20
Exchange traded securities		476,000		406,631		2
Foreign bonds		23,164,587		1,894,046		61
Redeemable preferred securities		306,000		194,000		2
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	$	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	$	1,400,820	$	5,810		7
Total more than 12 months in an unrealized loss position		47,082,945		5,220,587		180
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	48,483,765	$	5,226,397		187

19

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

As of September 30, 2024, the Company held 327 available-for-sale fixed maturity securities with an unrealized loss of $8,769,159 fair value of $115,440,110 and amortized cost of $124,209,269. These unrealized losses were primarily due to the market interest rate movements in the bond market as of September 30, 2024. The ratio of the fair value to the amortized cost of these 327 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%.

The change in the current estimate of credit losses on fixed maturity available-for-sale securities for the nine months ended September 30, 2024 and December 31, 2023, are summarized as follows:

	(Unaudited)
	September 30, 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		(192,224	)		(139,285	)
Ending balance	$	(622,694	)	$	(430,470	)

Net unrealized gains (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 appreciation (depreciation) had been realized as of September 30, 2024 and December 31, 2023, are summarized as follows:

	(Unaudited)
	September 30, 2024			December 31, 2023
Unrealized appreciation (depreciation) on available-for-sale securities	$	(7,530,511	)	$	(12,207,282	)
Adjustment to deferred acquisition costs		(12,998	)		3,094
Deferred income taxes		1,584,136			2,562,880
Net unrealized appreciation (depreciation) on available-for-sale securities	$	(5,959,373	)	$	(9,641,308	)
Assets held in trust under coinsurance agreement
Unrealized appreciation (depreciation) on fixed maturity securities available-for-sale	$	(3,794,845	)	$	(5,172,901	)

20

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

The Company’s investment in lottery prize cash flows categorized as other long-term investments in the statement of financial position was $59,366,184 and $61,487,939 as of September 30, 2024 and December 31, 2023, respectively. The lottery prize cash flows are assignments of the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries.

The amortized cost and fair value of fixed maturity available-for-sale securities and other long-term investments as of September 30, 2024, by contractual maturity, are summarized as follows:

	September 30, 2024 (Unaudited)
	Fixed Maturity Available-For-Sale Securities				Other Long-Term Investments
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,735,004	$	4,747,011	$	13,971,686	$	14,163,731
Due after one year through five years		44,536,963		43,344,606		30,151,893		32,368,836
Due after five years through ten years		32,641,025		31,294,273		10,280,110		12,330,428
Due after ten years		100,339,838		96,854,132		4,962,495		7,021,635
Due at multiple maturity dates		17,814,748		16,297,045		-		-
	$	200,067,578	$	192,537,067	$	59,366,184	$	65,884,630

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 September 30, 2024, by contractual maturity, are summarized as follows:

	Fixed Maturity Available-For-Sale Securities
	Amortized Cost		Fair Value
Due in one year or less	$	624,355	$	621,487
Due after one year through five years		2,547,229		2,490,158
Due after five years through ten years		3,418,063		3,308,443
Due after ten years		14,502,736		11,189,496
Due at multiple maturity dates		2,794,499		2,482,453
	$	23,886,882	$	20,092,037

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.

21

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, equity securities, mortgage loans on real estate and investment real estate for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, (Unaudited)
	Fixed Maturity Securities						Equity Securities					Mortgage Loans on Real Estate				Investment Real Estate
	2024			2023			2024			2023		2024		2023		2024		2023
Proceeds	$	2,665,956		$	1,915,384		$	5		$	-	$	32,613,850	$	-	$	12,637	$	-
Gross realized gains		164			32,207			-			-		31,632		-		3,143		-
Gross realized losses		(4,506	)		(16,695	)		(4	)		-		-		-		-		-
Loss on impairments		-			-			-			-		-		-		-		-

	Nine Months Ended September 30, (Unaudited)
	Fixed Maturity Securities						Equity Securities					Mortgage Loans on Real Estate					Investment Real Estate
	2024			2023			2024			2023		2024			2023		2024			2023
Proceeds	$	6,117,457		$	4,428,942		$	5		$	-	$	105,475,704		$	-	$	12,637		$	-
Gross realized gains		25,329			50,168			-			-		91,490			-		3,143			-
Gross realized losses		(73,784	)		(84,259	)		(4	)		-		(34,442	)		-		-			-
Loss on impairments		-			-			-			-		-			-		(129,436	)		-

The accumulated change in unrealized investment losses for fixed maturity available-for-sale for the three and nine months ended September 30, 2024 and 2023 and the amount of net realized investment gains (losses) on fixed maturity securities available-for-sale, equity securities, mortgage loans on real estate and investment real estate for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, (Unaudited)						Nine Months Ended September 30, (Unaudited)
	2024			2023			2024			2023
Change in unrealized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities	$	6,226,020		$	(4,568,559	)	$	4,676,771		$	(2,807,073	)
Fixed maturity securities held in trust under coinsurance agreement		1,293,761			(1,225,668	)		1,378,056			(639,686	)
Net realized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities		(4,342	)		15,512			(48,455	)		(34,091	)
Fixed maturity securities credit losses		(55,652	)		(27,010	)		(192,224	)		(110,642	)
Equity securities		(4	)		-			(4	)		-
Equity securities, changes in fair value		(69,951	)		34,885			(34,586	)		24,599
Mortgage loans on real estate		31,632			-			57,048			-
Investment real estate		3,143			-			3,143			-

22

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

Major categories of net investment income for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, (Unaudited)						Nine Months Ended September 30, (Unaudited)
	2024			2023			2024			2023
Fixed maturity securities	$	2,348,993		$	1,594,399		$	6,019,101		$	4,627,453
Equity securities		23,989			62,603			76,741			168,718
Other long-term investments		1,134,163			1,178,250			3,426,374			3,825,719
Mortgage loans		4,239,027			5,033,381			13,677,004			14,351,796
Policy loans		77,148			61,720			211,938			175,680
Short-term and other investments		716,389			793,653			1,851,753			2,063,066
Gross investment income		8,539,709			8,724,006			25,262,911			25,212,432
Investment expenses		(670,542	)		(538,072	)		(1,767,450	)		(1,952,286	)
Net investment income	$	7,869,167		$	8,185,934		$	23,495,461		$	23,260,146

TLIC and FBLIC are required to hold assets on deposit with various state insurance departments for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of September 30, 2024 and December 31, 2023, these required deposits, included in investment assets, had amortized costs that totaled $6,320,889 and $4,609,927, respectively. As of September 30, 2024 and December 31, 2023, these required deposits had fair values that totaled $6,353,664 and $4,596,130, respectively.

23

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

The Company’s mortgage loans by property type as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)
	September 30, 2024		December 31, 2023
Residential mortgage loans	$	193,594,885	$	224,258,534
Commercial mortgage loans by property type
Agricultural		244,846		986,207
Apartment		2,795,618		3,108,829
Industrial		367,285		1,267,264
Lodging		23,985		24,727
Office building		4,594,136		5,652,487
Retail		4,408,266		4,533,399
Total commercial mortgage loans by property type		12,434,136		15,572,913
Total mortgage loans	$	206,029,021	$	239,831,447
Mortgage loans held in trust under coinsurance agreement
Commercial mortgage loans	$	12,559,008	$	27,714,891
Less unearned interest on mortgage loans		5,219		133,010
Total mortgage loans held in trust under coinsurance agreement	$	12,553,789	$	27,581,881

There were 29 mortgage loans with a remaining principal balance of $7,930,818 that were more than 90 days past due as of September 30, 2024. There were 22 mortgage loans with a remaining principal balance of $6,382,227 that were more than 90 days past due as of September 30, 2023.

There were 14 mortgage loans in default and in the foreclosure process with a remaining principal balance of $4,473,626 as of September 30, 2024. There were five mortgage loans in default and in the foreclosure process with a remaining principal balance of $1,595,907 as of September 30, 2023.

The Company’s investment real estate as of September 30, 2024 and December 31, 2023 is summarized as follows:

	(Unaudited)
	September 30, 2024		December 31, 2023
Land - held for investment	$	411,000	$	540,436
Residential real estate - held for sale		2,041,094		764,967
Total investment in real estate	$	2,452,094	$	1,305,403

TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $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 $1,285,621 and transferred those properties to investment real estate held for sale.

24

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

2. Investments (continued)

During 2024, the Company sold investment real estate property with an aggregate carrying value of $9,494. The Company recorded a gross realized investment gain on sale of $3,143 based on an aggregate sales price of $12,637.

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.

3. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) on the measurement date.  The Company also considers the impact on fair value of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity.

The Company holds fixed maturity and equity securities that are measured and reported at fair market value on the statement of financial position. The Company determines the fair market values of its financial instruments based on the fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value, as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets include equity securities that are traded in an active exchange market.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include fixed maturity securities with quoted prices that are traded less frequently than exchange-traded instruments or assets and liabilities whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments where independent pricing information was not able to be obtained for a significant portion of the underlying assets.

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in and out of the Level 3 category as of the beginning of the period in which the reclassifications occur.

25

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

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 September 30, 2024 and December 31, 2023 is summarized as follows:

	Level 1		Level 2		Level 3		Total
	September 30, 2024 (Unaudited)
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	3,877,216	$	-	$	3,877,216
States and political subdivisions		-		9,038,764		-		9,038,764
U.S. government angency mortgage backed securities		-		34,095,689		-		34,095,689
Commercial mortgage-backed securities		-		15,225,467		-		15,225,467
Residential mortgage-backed securities		-		14,578		-		14,578
Corporate bonds		-		85,984,462		-		85,984,462
Asset-backed securities		-		14,299,043		-		14,299,043
Exchange traded securities		-		486,000		-		486,000
Foreign bonds		-		28,458,848		-		28,458,848
Redeemable preferred securities		-		1,057,000		-		1,057,000
Total fixed maturity securities	$	-	$	192,537,067	$	-	$	192,537,067
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	20,092,037	$	-	$	20,092,037
Equity securities
Mutual funds	$	-	$	53,642	$	-	$	53,642
Corporate common stock		266,053		-		59,911		325,964
Total equity securities	$	266,053	$	53,642	$	59,911	$	379,606
	December 31, 2023
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	3,798,284	$	-	$	3,798,284
States and political subdivisions		-		9,531,870		-		9,531,870
U.S. government agency mortgage backed securities		-		10,306,464		-		10,306,464
Commercial mortgage-backed securities		-		8,471,538		-		8,471,538
Residential mortgage-backed securities		-		14,314		-		14,314
Corporate bonds		-		79,341,307		-		79,341,307
Asset-backed securities		-		11,492,496		-		11,492,496
Exchange traded securities		-		476,000		-		476,000
Foreign bonds		-		25,212,675		-		25,212,675
Redeemable preferred securities		-		1,056,000		-		1,056,000
Total fixed maturity securities	$	-	$	149,700,948	$	-	$	149,700,948
Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	51,651,259	$	-	$	51,651,259
Equity securities
Mutual funds	$	-	$	50,226	$	-	$	50,226
Corporate common stock		304,064		-		65,240		369,304
Total equity securities	$	304,064	$	50,226	$	65,240	$	419,530

As of September 30, 2024 and December 31, 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.

26

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

3. Fair Value Measurements (continued)

This private placement common stock represents an investment in 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 commence 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 and equity securities are primarily based on prices supplied by a third party investment service. The third party investment service provides quoted prices in the market which use observable inputs in developing such rates.

The Company analyzes market valuations received to verify reasonableness and to understand the key assumptions used and the sources. Since the fixed maturity securities owned by the Company do not trade on a daily basis, the third party investment service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing. As the fair value estimates of the Company’s fixed maturity securities are based on observable market information rather than market quotes, the estimates of fair value on these fixed maturity securities are included in Level 2 of the hierarchy. The Company’s Level 2 investments include obligations of U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.

The Company’s equity securities are included in Level 1 and Level 2 and the private placement common stock and joint venture investment are included in Level 3. Level 1 for 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 nine months ended September 30, 2024 and December 31, 2023 is summarized as follows:

	(Unaudited)
	September 30, 2024			December 31, 2023
Beginning balance	$	65,240		$	53,996
Joint venture net income		67,936			130,550
Joint venture distribution		(73,265	)		(119,306	)
Ending balance	$	59,911		$	65,240

27

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

3. Fair Value Measurements (continued)

The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of September 30, 2024 and December 31, 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:

Financial instruments disclosed, but not carried, at fair value:

	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
	September 30, 2024 (Unaudited)
Financial assets
Mortgage loans on real estate
Commercial	$	12,434,136	$	12,742,487	$	-	$	-	$	12,742,487
Residential		193,594,885		204,442,711		-		-		204,442,711
Policy loans		4,067,802		4,067,802		-		-		4,067,802
Short-term investments		751,349		751,349		751,349		-		-
Other long-term investments		59,366,184		65,884,630		-		-		65,884,630
Cash and cash equivalents		65,104,323		65,104,323		65,104,323		-		-
Accrued investment income		5,428,561		5,428,561		-		-		5,428,561
Total financial assets	$	340,747,240	$	358,421,863	$	65,855,672	$	-	$	292,566,191
Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial	$	12,559,008	$	12,559,008	$	-	$	-	$	12,559,008
Less unearned interest on mortgage loans		5,219		5,219		-		-		5,219
Cash and cash equivalents		1,947,947		1,947,947		1,947,947		-		-
Total financial assets held in trust under coinsurance agreement	$	14,501,736	$	14,501,736	$	1,947,947	$	-	$	12,553,789
Policyholders' account balances	$	397,299,695	$	347,270,650	$	-	$	-	$	347,270,650
Policy claims		2,530,121		2,530,121		-		-		2,530,121
Total financial liabilities	$	399,829,816	$	349,800,771	$	-	$	-	$	349,800,771
	December 31, 2023
Financial assets
Mortgage loans on real estate
Commercial	$	15,572,913	$	14,803,724	$	-	$	-	$	14,803,724
Residential		224,258,534		196,514,414		-		-		196,514,414
Policy loans		3,474,116		3,474,116		-		-		3,474,116
Short-term investments		298,257		298,257		298,257		-		-
Other long-term investments		61,487,939		68,023,717		-		-		68,023,717
Cash and cash equivalents		33,839,741		33,839,741		33,839,741		-		-
Accrued investment income		6,214,459		6,214,459		-		-		6,214,459
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	$	27,714,891	$	27,714,891	$	-	$	-	$	27,714,891
Less unearned interest on mortgage loans		133,010		133,010		-		-		133,010
Cash and cash equivalents		711,733		711,733		711,733		-		-
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	$	391,247,676	$	344,806,580	$	-	$	-	$	344,806,580
Policy claims		2,410,243		2,410,243		-		-		2,410,243
Total financial liabilities	$	393,657,919	$	347,216,823	$	-	$	-	$	347,216,823

28

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

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.

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.

29

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

4. Segment Data

The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment. These segments as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, (Unaudited)				Nine Months Ended September 30, (Unaudited)
	2024		2023		2024		2023
Revenues:
Life insurance operations	$	12,601,421	$	12,021,281	$	36,734,430	$	34,261,450
Annuity operations		6,042,833		6,146,683		17,486,538		18,536,138
Corporate operations		777,267		2,083,113		1,885,891		3,194,303
Total	$	19,421,521	$	20,251,077	$	56,106,859	$	55,991,891
Income before income taxes:
Life insurance operations	$	1,726,285	$	1,526,550	$	4,653,934	$	2,380,841
Annuity operations		362,359		682,237		1,131,076		2,450,351
Corporate operations		300,252		1,838,214		669,830		2,362,932
Total	$	2,388,896	$	4,047,001	$	6,454,840	$	7,194,124
Depreciation and amortization expense:
Life insurance operations	$	2,270,402	$	1,900,706	$	6,556,495	$	5,590,543
Annuity operations		544,101		353,671		1,350,021		1,085,023
Total	$	2,814,503	$	2,254,377	$	7,906,516	$	6,675,566

	(Unaudited)
	September 30, 2024		December 31, 2023
Assets:
Life insurance operations	$	167,836,515	$	164,653,497
Annuity operations		486,920,185		495,979,724
Corporate operations		11,703,471		11,388,314
Total	$	666,460,171	$	672,021,535

5. Federal Income Taxes

The provision for federal income taxes is based on the asset and liability method of accounting for income taxes. Deferred income taxes are provided for the cumulative temporary differences between balances of assets and liabilities determined under GAAP and the balances using tax bases.

The Company has no known uncertain tax benefits within its provision for income taxes. In addition, the Company does not believe it would be subject to any penalties or interest relative to any open tax years and, therefore, has not accrued any such amounts. The Company files U.S. federal income tax returns and income tax returns in various state jurisdictions.  With the 2023 U.S. federal income tax return filed on October 8, 2024, the 2021 through 2023 U.S. federal tax years are now subject to income tax examination by tax authorities. The Company classifies any interest and penalties (if applicable) as income tax expense in the financial statements.

30

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

6. Contingent Liabilities

From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in 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 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 these lawsuits are not material in relation to the Company’s financial position or results of operations.

Guaranty fund assessments, brought about by the insolvency of life and health insurers, are levied at the discretion of the various state guaranty fund associations to cover association obligations. In most states, guaranty fund assessments may be taken as a credit against premium taxes, typically over a five-year period.

31

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The changes in the components of the Company’s accumulated other comprehensive loss for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, 2024 and 2023 (Unaudited)
	Unrealized
	Depreciation						Accumulated
	on			Adjustment to			Other
	Available-For-Sale			Deferred Acquisition			Comprehensive
	Securities			Costs			loss
Balance as of July 1, 2024	$	(10,867,673	)	$	2,532		$	(10,865,141	)
Other comprehensive income before reclassifications, net of tax		4,915,125			(12,787	)		4,902,338
Less amounts reclassified from accumulated other comprehensive loss having no credit losses, net of tax		(3,430	)		-			(3,430	)
Other comprehensive income		4,918,555			(12,787	)		4,905,768
Balance as of September 30, 2024	$	(5,949,118	)	$	(10,255	)	$	(5,959,373	)
Balance as of July 1, 2023	$	(12,702,105	)	$	3,461		$	(12,698,644	)
Other comprehensive loss before reclassifications, net of tax		(3,596,907	)		843			(3,596,064	)
Less amounts reclassified from accumulated other comprehensive income (loss) having no credit losses, net of tax		12,255			-			12,255
Other comprehensive loss		(3,609,162	)		843			(3,608,319	)
Balance as of September 30, 2023	$	(16,311,267	)	$	4,304		$	(16,306,963	)

	Nine Months Ended September 30, 2024 and 2023 (Unaudited)
	Unrealized
	Depreciation						Accumulated
	on			Adjustment to			Other
	Available-For-Sale			Deferred Acquisition			Comprehensive
	Securities			Costs			Loss
Balance as of January 1, 2024	$	(9,643,766	)	$	2,458		$	(9,641,308	)
Other comprehensive income before reclassifications, net of tax		3,656,369			(12,713	)		3,643,656
Less amounts reclassified from accumulated other comprehensive loss having no credit losses, net of tax		(38,279	)		-			(38,279	)
Other comprehensive income		3,694,648			(12,713	)		3,681,935
Balance as of September 30, 2024	$	(5,949,118	)	$	(10,255	)	$	(5,959,373	)
Balance as of January 1, 2023	$	(14,323,715	)	$	4,036		$	(14,319,679	)
Cumulative effect adjustment as of January 1, 2023
Accumulated credit loss January 1, 2023		230,036			-			230,036
Other comprehensive loss before reclassifications, net of tax		(2,244,520	)		268			(2,244,252	)
Less amounts reclassified from accumulated other comprehensive income (loss) having no credit losses, net of tax		(26,932	)		-			(26,932	)
Other comprehensive loss		(2,217,588	)		268			(2,217,320	)
Balance as of September 30, 2023	$	(16,311,267	)	$	4,304		$	(16,306,963	)

32

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss (continued)

The pretax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit) for each component for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, 2024 (Unaudited)
				Income Tax
	Pretax			Expense (Benefit)			Net of Tax
Other comprehensive income:
Change in net unrealized losses on available-for-sale securities:
Unrealized holding gains arising during the period	$	6,221,678		$	1,306,553		$	4,915,125
Reclassification adjustment for net losses included in operations having no credit losses		(4,342	)		(912	)		(3,430	)
Net unrealized gains on investments		6,226,020			1,307,465			4,918,555
Adjustment to deferred acquisition costs		(16,186	)		(3,399	)		(12,787	)
Total other comprehensive income	$	6,209,834		$	1,304,066		$	4,905,768

	Three Months Ended September 30, 2023 (Unaudited)
				Income Tax
	Pretax			Expense (Benefit)			Net of Tax
Other comprehensive loss:
Change in net unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period	$	(4,553,047	)	$	(956,140	)	$	(3,596,907	)
Reclassification adjustment for net gains included in operations having no credit losses		15,512			3,257			12,255
Net unrealized losses on investments		(4,568,559	)		(959,397	)		(3,609,162	)
Adjustment to deferred acquisition costs		1,068			225			843
Total other comprehensive loss	$	(4,567,491	)	$	(959,172	)	$	(3,608,319	)

	Nine Months Ended September 30, 2024 (Unaudited)
				Income Tax
	Pretax			Expense (Benefit)			Net of Tax
Other comprehensive income:
Change in net unrealized losses on available-for-sale securities:
Unrealized holding gains arising during the period	$	4,628,316		$	971,947		$	3,656,369
Reclassification adjustment for net losses included in operations having no credit losses		(48,455	)		(10,176	)		(38,279	)
Net unrealized gains on investments		4,676,771			982,123			3,694,648
Adjustment to deferred acquisition costs		(16,092	)		(3,379	)		(12,713	)
Total other comprehensive income	$	4,660,679		$	978,744		$	3,681,935

	Nine Months Ended September 30, 2023 (Unaudited)
				Income Tax
	Pretax			Expense (Benefit)			Net of Tax
Other comprehensive loss:
Change in net unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period	$	(2,841,164	)	$	(596,644	)	$	(2,244,520	)
Reclassification adjustment for net losses included in operations having no credit losses		(34,091	)		(7,159	)		(26,932	)
Net unrealized losses on investments		(2,807,073	)		(589,485	)		(2,217,588	)
Adjustment to deferred acquisition costs		340			72			268
Total other comprehensive loss	$	(2,806,733	)	$	(589,413	)	$	(2,217,320	)

33

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

7. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss (continued)

Realized gains and losses on the sales of investments are determined based upon the specific identification method and include provisions for other-than-temporary impairments where appropriate.

The pretax and the related income tax components of the amounts reclassified from the Company’s accumulated other comprehensive loss to the Company’s consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

	Three Months Ended September 30, (Unaudited)					Nine Months Ended September 30, (Unaudited)
Reclassification Adjustments	2024			2023		2024			2023
Unrealized gains (losses) on available-for-sale securities having no credit losses:
Realized gains (losses) on sales of securities (a)	$	(4,342	)	$	15,512	$	(48,455	)	$	(34,091	)
Income tax expense (benefit) (b)		(912	)		3,257		(10,176	)		(7,159	)
Total reclassification adjustments	$	(3,430	)	$	12,255	$	(38,279	)	$	(26,932	)

(a) These items appear within net realized investment gains (losses) in the consolidated statements of operations.

(b) These items appear within federal income taxes in the consolidated statements of operations.

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

As of September 30, 2024, $1,127,400of independent residential mortgage loans on real estate is held in escrow by a third party for the benefit of the Company.   As of September 30, 2024, $1,111,014 of that escrow amount is available to the Company as additional collateral on $4,542,681 of advances to the loan originator. The remaining September 30, 2024 escrow amount of $16,386 is available to the Company as additional collateral on its investment of $3,277,276 in residential mortgage loans on real estate. In addition, the Company has an additional $1,018,853 allowance for possible loan losses in the remaining $202,751,745 of investments in mortgage loans on real estate as of September 30, 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 September 30, 2024, the Company’s Chairman, President and Chief Executive Officer has provided approximately $2,300,000 of loans to this mortgage loan originator.

34

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

8. Allowance for Loan Losses from Mortgage Loans on Real Estate (continued)

The balances of and changes in the Company’s credit losses related to mortgage loans on real estate as of and for the three and nine months ended September 30, 2024 and 2023 are summarized as follows (excluding $3,277,276 and $11,518,652 of mortgage loans on real estate as of September 30, 2024 and 2023, respectively, with one loan originator where independent mortgage loan balances are held in escrow by a third party for the benefit of the Company):

	Unaudited
	Three Months Ended September 30,
	Residential Mortgage Loans					Commercial Mortgage Loans						Total
	2024		2023			2024			2023			2024		2023
Allowance, beginning	$	933,517	$	1,076,628		$	72,239		$	83,246		$	1,005,756	$	1,159,874
Charge offs		-		-			-			-			-		-
Recoveries		-		-			-			-			-		-
Provision		22,853		(18,002	)		(9,756	)		(4,202	)		13,097		(22,204	)
Allowance, ending	$	956,370	$	1,058,626		$	62,483		$	79,044		$	1,018,853	$	1,137,670
Allowance, ending:
Individually evaluated for impairment	$	-	$	-		$	-		$	-		$	-	$	-
Collectively evaluated for impairment	$	956,370	$	1,058,626		$	62,483		$	79,044		$	1,018,853	$	1,137,670
Carrying Values:
Individually evaluated for reserve allowance	$	-	$	-		$	-		$	-		$	-	$	-
Collectively evaluated for reserve allowance	$	190,317,609	$	210,666,578		$	12,434,136		$	15,729,803		$	202,751,745	$	226,396,381

	(Unaudited)
	Nine Months Ended September 30,
	Residential Mortgage Loans					Commercial Mortgage Loans						Total
	2024			2023		2024			2023			2024			2023
Allowance, beginning	$	1,085,919		$	1,030,424	$	78,183		$	90,024		$	1,164,102		$	1,120,448
Charge offs		-			-		-			-			-			-
Recoveries		-			-		-			-			-			-
Provision		(129,549	)		28,202		(15,700	)		(10,980	)		(145,249	)		17,222
Allowance, ending	$	956,370		$	1,058,626	$	62,483		$	79,044		$	1,018,853		$	1,137,670
Allowance, ending:
Individually evaluated for impairment	$	-		$	-	$	-		$	-		$	-		$	-
Collectively evaluated for impairment	$	956,370		$	1,058,626	$	62,483		$	79,044		$	1,018,853		$	1,137,670
Carrying Values:
Individually evaluated for reserve allowance	$	-		$	-	$	-		$	-		$	-		$	-
Collectively evaluated for reserve allowance	$	190,317,609		$	210,666,578	$	12,434,136		$	15,729,803		$	202,751,745		$	226,396,381

35

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2024

(Unaudited)

8. Allowance for Loan Losses from Mortgage Loans on Real Estate (continued)

The Company utilizes the ratio of the carrying value of individual mortgage loans compared to the individual appraisal value to evaluate the credit quality of its mortgage loans on real estate (commonly referred to as the loan-to-value ratio). The Company’s residential and commercial mortgage loans on real estate by credit quality using this ratio as of September 30, 2024 and December 31, 2023 are summarized as follows:

	Residential Mortgage Loans				Commercial Mortgage Loans				Total Mortgage Loans
	(Unaudited)				(Unaudited)				(Unaudited)
Loan-To-Value Ratio	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023
Over 70% to 80%	$	61,625,641	$	75,718,654	$	2,092,934	$	2,099,950	$	63,718,575	$	77,818,604
Over 60% to 70%		53,711,603		65,525,308		1,707,093		2,958,186		55,418,696		68,483,494
Over 50% to 60%		31,472,270		38,548,660		1,237,765		1,809,817		32,710,035		40,358,477
Over 40% to 50%		22,127,725		22,283,148		3,647,961		2,394,557		25,775,686		24,677,705
Over 30% to 40%		12,861,945		10,056,308		2,006,566		3,817,212		14,868,511		13,873,520
Over 20% to 30%		7,644,202		7,929,094		460,872		463,856		8,105,074		8,392,950
Over 10% to 20%		2,963,776		3,178,001		435,195		1,714,394		3,398,971		4,892,395
10% or less		1,187,723		1,019,361		845,750		314,941		2,033,473		1,334,302
Total	$	193,594,885	$	224,258,534	$	12,434,136	$	15,572,913	$	206,029,021	$	239,831,447

36

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

First Trinity Financial Corporation (“we” “us”, “our”, “FTFC” or the “Company”) conducts operations as an insurance holding company emphasizing ordinary life insurance products and annuity contracts in niche markets.

As an insurance provider, we collect premiums in the current period to pay future benefits to our policy and contract holders. Our core TLIC and FBLIC operations include issuing modified premium whole life insurance with a flexible premium deferred annuity, ordinary whole life, final expense, term and annuity products to 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.

Acquisitions

The Company expects to facilitate growth through acquisitions of other life insurance companies and/or blocks of life insurance and annuity business. In late December 2008, the Company completed its acquisition of 100% of the outstanding stock of FLAC for $2,500,000 and had additional acquisition related expenses of $195,234.

In late December 2011, the Company completed its acquisition of 100% of the outstanding stock of FBLIC for $13,855,129.

On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement and assumed liabilities of $3,055,916.

In 2019, FTFC’s acquisition of TAI for $250,000 was approved by the Barbados, West Indies regulators.

Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The aggregate purchase price of K-TENN was $1,746,240.

On January 4, 2022, FTFC acquired RCLIC from Royalty in exchange for 722,644 shares of FTFC’s Class A common stock issued to unrelated parties. Royalty was dissolved immediately after FTFC acquired RCLIC. On March 1, 2022, the Missouri Department of Commerce and Insurance approved FTFC’s contribution and merger of RCLIC into FBLIC.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition, results of operations and liquidity and capital resources is based on our consolidated financial statements that have been prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We evaluate our estimates and assumptions continually, including those related to investments, deferred acquisition costs, allowance for loan losses from mortgages, value of insurance business acquired, policy liabilities, regulatory requirements, contingencies and litigation. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

37

For a description of the Company’s critical accounting policies and estimates, please refer to “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.  The Company considers its most critical accounting estimates to be those applied to investments in fixed maturities securities, mortgage loans on real estate, deferred policy acquisition costs, value of insurance business acquired and future policy benefits. There have been no material changes to the Company’s critical accounting policies and estimates since December 31, 2023.

Cybersecurity

The Company has established and continues to enhance its cybersecurity enterprise risk management program. The Company’s executive team meets formally at least monthly, and informally as needed, to set and maintain a strategy focused on achieving a high level of cybersecurity protection. The Company’s executive management team makes quarterly reports to the Company’s Board of Directors and Audit Committee.

The Company’s executive management team is enhanced by the inclusion of an information technology external consultant to advise the Company’s executive management team and to focus on developing and maintaining external and internal cybersecurity. Working with Company executives and staff, the information technology consultant advises and helps the Company implement its strategy with respect to:

● Computer hardware and software,

● Security access, logging and user termination,

● In house and remote user access – user accounts, password protection, authentication, monitoring usage, intrusion detection, incident identification and related controls,

● Encryption,

● System change control,

● Data back up and remote sites,

● Data recovery,

● and Disaster recovery

The Company also utilizes training to foster an environment of information security awareness, training and education. Beyond making employees aware of its cybersecurity risk management program, strategy and governance, this training also introduces all employees to many types of cybersecurity risks to introduce skepticism and enhance skills to identify and report potential situations encountered to the executive management team for further assessment.

Adopted Accounting Standards

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.

38

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.

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.

39

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. This guidance should be applied on a prospective basis but retrospective application is permitted. Early adoption is permitted. The Company anticipates adopting and disclosing this Update for year-end reporting 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 September 30, 2024 Form 10-Q.

40

Business Segments

FASB guidance requires a "management approach" in the presentation of business segments based on how management internally evaluates the operating performance of business units. The discussion of segment operating results that follows is being provided based on segment data prepared in accordance with this methodology.

Our business segments are as follows:

● Life insurance operations, consisting of the life insurance operations of TLIC, FBLIC and TAI;

● Annuity operations, consisting of the annuity operations of TLIC, FBLIC and TAI and

● Corporate operations, which includes the results of the parent company and TMC after the elimination of intercompany amounts.

Please see below and Note 4 to the Consolidated Financial Statements for the three months and nine months ended September 30, 2024 and 2023 and as of September 30, 2024 and December 31, 2023 for additional information regarding segment information.

FINANCIAL HIGHLIGHTS

Consolidated Condensed Results of Operations for the Three Months Ended September 30, 2024 and 2023

	(Unaudited)
	Three Months Ended September 30,					Amount Change
	2024			2023		2024 less 2023
Premiums	$	10,794,062		$	9,973,566	$	820,496
Net investment income		7,869,167			8,185,934		(316,767	)
Net realized investment gains (losses)		(95,174	)		23,387		(118,561	)
Service fees		810,027			1,437,116		(627,089	)
Other income		43,439			631,074		(587,635	)
Total revenues		19,421,521			20,251,077		(829,556	)
Benefits and claims		11,554,420			11,421,935		132,485
Expenses		5,478,205			4,782,141		696,064
Total benefits, claims and expenses		17,032,625			16,204,076		828,549
Income before federal income tax expense		2,388,896			4,047,001		(1,658,105	)
Federal income tax expense		447,612			863,773		(416,161	)
Net income	$	1,941,284		$	3,183,228	$	(1,241,944	)
Net income per common share
Class A common stock	$	0.2050		$	0.3361	$	(0.1311	)
Class B common stock	$	0.1742		$	0.2857	$	(0.1115	)

41

Consolidated Condensed Results of Operations for the Nine Months Ended September 30, 2024 and 2023

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Premiums	$	30,747,471		$	28,681,414		$	2,066,057
Net investment income		23,495,461			23,260,146			235,315
Net realized investment losses		(215,078	)		(120,134	)		(94,944	)
Loss on impairments		(129,436	)		-			(129,436	)
Service fees		1,556,193			3,530,958			(1,974,765	)
Other income		652,248			639,507			12,741
Total revenues		56,106,859			55,991,891			114,968
Benefits and claims		33,460,505			33,706,130			(245,625	)
Expenses		16,191,514			15,091,637			1,099,877
Total benefits, claims and expenses		49,652,019			48,797,767			854,252
Income before federal income tax expense		6,454,840			7,194,124			(739,284	)
Federal income tax expense		1,329,423			1,493,891			(164,468	)
Net income	$	5,125,417		$	5,700,233		$	(574,816	)
Net income per common share
Class A common stock	$	0.5412		$	0.6019		$	(0.0607	)
Class B common stock	$	0.4600		$	0.5116		$	(0.0516	)

Consolidated Condensed Financial Position as of September 30, 2024 and December 31, 2023

	(Unaudited)				Amount Change
	September 30, 2024		December 31, 2023		2024 to 2023
Investment assets	$	465,583,123	$	456,517,640	$	9,065,483
Assets held in trust under coinsurance agreement		34,582,412		79,940,459		(45,358,047	)
Other assets		166,294,636		135,563,436		30,731,200
Total assets	$	666,460,171	$	672,021,535	$	(5,561,364	)
Policy liabilities	$	533,755,806	$	517,637,743	$	16,118,063
Funds withheld under coinsurance agreement		33,686,270		77,257,253		(43,570,983	)
Deferred federal income taxes		5,916,337		4,228,189		1,688,148
Other liabilities		20,278,198		8,882,142		11,396,056
Total liabilities		593,636,611		608,005,327		(14,368,716	)
Shareholders' equity		72,823,560		64,016,208		8,807,352
Total liabilities and shareholders' equity	$	666,460,171	$	672,021,535	$	(5,561,364	)
Shareholders' equity per common share
Class A common stock	$	7.6897	$	6.7597	$	0.9300
Class B common stock	$	6.5362	$	5.7457	$	0.7905

42

Results of Operations – Three Months Ended September 30, 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 three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,					Amount Change
	2024			2023		2024 less 2023
Premiums	$	10,794,062		$	9,973,566	$	820,496
Net investment income		7,869,167			8,185,934		(316,767	)
Net realized investment gains (losses)		(95,174	)		23,387		(118,561	)
Service fees		810,027			1,437,116		(627,089	)
Other income		43,439			631,074		(587,635	)
Total revenues	$	19,421,521		$	20,251,077	$	(829,556	)

The $829,556 decrease in total revenues for the three months ended September 30, 2024 is discussed below.

Premiums

Our premiums for the three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Ordinary life first year	$	1,075,798	$	787,295	$	288,503
Ordinary life renewal		2,365,493		1,973,795		391,698
Final expense first year		862,882		872,876		(9,994	)
Final expense renewal		6,489,889		6,339,600		150,289
Total premiums	$	10,794,062	$	9,973,566	$	820,496

The $820,496 increase in premiums for the three months ended September 30, 2024 is primarily due to a $391,698 increase in ordinary life renewal premiums, $288,503 increase in ordinary life first year premiums and $150,289 increase in final expense renewal premiums that exceeded a $9,994 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.

43

Net Investment Income

The major components of our net investment income for the three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities	$	2,348,993		$	1,594,399		$	754,594
Equity securities		23,989			62,603			(38,614	)
Other long-term investments		1,134,163			1,178,250			(44,087	)
Mortgage loans		4,239,027			5,033,381			(794,354	)
Policy loans		77,148			61,720			15,428
Short-term and other investments		716,389			793,653			(77,264	)
Gross investment income		8,539,709			8,724,006			(184,297	)
Investment expenses		(670,542	)		(538,072	)		132,470
Net investment income	$	7,869,167		$	8,185,934		$	(316,767	)

The $184,297 decrease in gross investment income for the three months ended September 30, 2024 is primarily due to $794,354 decrease in mortgage loans and a $77,264 decrease in short-term and other investments that exceeded a $754,594 increase in fixed maturity securities.

The decrease in mortgage loans is primarily due to decreased mortgage loans investments of $31.9 million since September 30, 2023. The decline in short-term and other investments is primarily due to a decreased gross yield of 4.49% in 2024 compared to 7.83% in 2023. The increase in fixed maturity securities investment income is primarily due to increased fixed maturity securities investments of $50.9 million since September 30, 2023.

The $132,740 increase in investment expense for the three months ended September 30, 2024 is primarily due to increased mortgage loan acquisition expenses.

44

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, changes in fair value of equity securities and changes in estimate of credit losses.

Our net realized investment gains (losses) for the three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities available-for-sale:
Sale proceeds	$	2,665,956		$	1,915,384		$	750,572
Amortized cost at sale date		2,670,298			1,899,872			770,426
Net realized gains (losses)	$	(4,342	)	$	15,512		$	(19,854	)
Equity securities:
Sale proceeds	$	5		$	-		$	5
Cost at sale date		9			-			9
Net realized losses	$	(4	)	$	-		$	(4	)
Mortgage loans on real estate:
Payment and sale proceeds on mortgage loans	$	32,613,850		$	-		$	32,613,850
Principal collections		32,582,218			-			32,582,218
Net realized gans	$	31,632		$	-		$	31,632
Investment real estate:
Sale proceeds	$	12,637		$	-		$	12,637
Carrying value at sale date		9,494			-			9,494
Net realized gains	$	3,143		$	-		$	3,143
Equity securities, changes in fair value	$	(69,951	)	$	34,885		$	(104,836	)
Changes in current estimate of credit losses	$	(55,652	)	$	(27,010	)	$	(28,642	)
Net realized investment gains (losses)	$	(95,174	)	$	23,387		$	(118,561	)

Service Fees

The $627,089 decrease in service fees for the three months ended September 30, 2024 is primarily due to a decrease in fees from Trinity Mortgage Corporation brokering mortgage loans for a fee to third parties.

Other Income

The $587,635 decrease in other income for the three months ended September 30, 2024 is primarily due to a decline in interest on collateralized loans from an investment vendor.

45

Total Benefits, Claims and Expenses

Our benefits, claims and expenses are primarily generated from benefit payments, surrenders, interest credited to policyholders, change in reserves, commissions and other underwriting, insurance and acquisition expenses. Benefit payments can significantly impact expenses from period to period.

Our benefits, claims and expenses for the three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Benefits and claims
Increase in future policy benefits	$	3,731,925		$	3,733,264		$	(1,339	)
Death benefits		3,049,217			3,235,121			(185,904	)
Surrenders		693,011			489,729			203,282
Interest credited to policyholders		3,984,360			3,876,088			108,272
Dividend, endowment and supplementary life contract benefits		95,907			87,733			8,174
Total benefits and claims		11,554,420			11,421,935			132,485
Expenses
Policy acquisition costs deferred		(4,757,508	)		(2,987,689	)		(1,769,819	)
Amortization of deferred policy acquisition costs		2,767,806			2,189,089			578,717
Amortization of value of insurance business acquired		46,697			65,288			(18,591	)
Commissions		4,773,779			2,962,287			1,811,492
Other underwriting, insurance and acquisition expenses		2,647,431			2,553,166			94,265
Total expenses		5,478,205			4,782,141			696,064
Total benefits, claims and expenses	$	17,032,625		$	16,204,076		$	828,549

The $828,549 increase in total benefits, claims and expenses for the three months ended September 30, 2024 is discussed below.

Benefits and Claims

The $132,485 increase in benefits and claims for the three months ended September 30, 2024 is primarily due to the following:

● $203,282 increase in surrenders is based upon policyholder election.

● $108,272 increase in interest credited to policyholders is primarily due to an increased interest credit rate of 4.20% in 2024 compared to 3.80% in 2023.

● $185,904 decrease in death benefits is primarily due to approximately $224,000 of decreased ordinary life benefits that exceeded $39,000 of increased final 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.

46

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 life insurance policies and annuity contracts.

For the three months ended September 30, 2024 and 2023, capitalized costs were $4,757,508 and $2,987,689, respectively. Amortization of deferred policy acquisition costs for the three months ended September 30, 2024 and 2023 were $2,767,806 and $2,189,089, respectively.

The $1,769,819 increase in 2024 acquisition costs deferred is primarily related to increased annuity production with a corresponding increase in deferral of eligible annuity commissions. The $578,717 increase in 2024 amortization of deferred acquisition costs is due to 2024 life and annuity surrenders and withdrawal activity.

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 $46,697 and $65,288 for the three months ended September 30, 2024 and 2023, respectively, representing a $18,591 decrease.

Commissions

Our commissions for the three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Annuity	$	1,747,347	$	258,704	$	1,488,643
Ordinary life first year		1,145,501		843,263		302,238
Ordinary life renewal		263,161		206,895		56,266
Final expense first year		1,019,524		1,059,015		(39,491	)
Final expense renewal		598,246		594,410		3,836
Total commissions	$	4,773,779	$	2,962,287	$	1,811,492

The $1,811,492 increase in commissions for the three months ended September 30, 2024 is primarily due to a $1,488,643 increase annuity commissions (corresponding to $43,428,859 of increased annuity deposits retained) and a $302,238 increase in ordinary life first year commissions (corresponding to $288,503 increased ordinary life first year premiums).

Other Underwriting, Insurance and Acquisition Expenses

The $94,265 increase in underwriting, insurance and acquisition expenses for the three months ended September 30, 2024 was primarily related to an increase in legal fees and third party administrative fees.

Federal Income Taxes

FTFC filed its 2023 consolidated federal income tax return with TLIC, FBLIC and TMC on October 8, 2024. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes. For the three months ended September 30, 2024 and 2023, current income tax expense was $223,012 and $912,430, respectively. For the three months ended September 30, 2024 and 2023, deferred federal income tax expense (benefit) was $224,600 and ($48,657), respectively.

47

Net Income Per Common Share Basic

For the three months ended September 30, 2024 and 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 three months ended September 30, 2024, the net income allocated to the Class A shareholders of $1,923,668 is the total net income $1,941,284 less the net income allocated to the Class B shareholders $17,616. For the three months ended September 30, 2023, the net income allocated to the Class A shareholders of $3,154,342 is the total net income $3,183,228 less the net income allocated to the Class B shareholders $28,886.

The weighted average outstanding common shares basic for the three months ended September 30, 2024 and 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 three months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Three Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Revenues:
Life insurance operations	$	12,601,421	$	12,021,281	$	580,140
Annuity operations		6,042,833		6,146,683		(103,850	)
Corporate operations		777,267		2,083,113		(1,305,846	)
Total	$	19,421,521	$	20,251,077	$	(829,556	)
Income (loss) before federal income taxes:
Life insurance operations	$	1,726,285	$	1,526,550	$	199,735
Annuity operations		362,359		682,237		(319,878	)
Corporate operations		300,252		1,838,214		(1,537,962	)
Total	$	2,388,896	$	4,047,001	$	(1,658,105	)

48

The increases and decreases of revenues and profitability from our business segments for the three months ended September 30, 2024 and 2023 are summarized as follows:

	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	820,496		$	-		$	-		$	820,496
Net invesment income		(236,128	)		(178,369	)		97,730			(316,767	)
Net realized investment losses		(25,830	)		(92,731	)		-			(118,561	)
Service fees and other income		21,602			167,250			(1,403,576	)		(1,214,724	)
Total revenue		580,140			(103,850	)		(1,305,846	)		(829,556	)
Benefits and claims
Increase in future policy benefits		(1,339	)		-			-			(1,339	)
Death benefits		(185,904	)		-			-			(185,904	)
Surrenders		203,282			-			-			203,282
Interest credited to policyholders		-			108,272			-			108,272
Dividend, endowment and supplementary life contract benefits		8,174			-			-			8,174
Total benefits and claims		24,213			108,272			-			132,485
Expenses
Policy acquisition costs deferred net of amortization		(21,488	)		(1,169,614	)		-			(1,191,102	)
Amortization of value of insurance business acquired		(9,296	)		(9,295	)		-			(18,591	)
Commissions		322,849			1,488,643			-			1,811,492
Other underwriting, insurance and acquisition expenses		64,127			(201,978	)		232,116			94,265
Total expenses		356,192			107,756			232,116			696,064
Total benefits, claims and expenses		380,405			216,028			232,116			828,549
Income (loss) before federal income tax expense (benefit)	$	199,735		$	(319,878	)	$	(1,537,962	)	$	(1,658,105	)

Results of Operations – Nine Months Ended September 30, 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 nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Premiums	$	30,747,471		$	28,681,414		$	2,066,057
Net investment income		23,495,461			23,260,146			235,315
Net realized investment losses		(215,078	)		(120,134	)		(94,944	)
Losses on impairments		(129,436	)		-			(129,436	)
Service fees		1,556,193			3,530,958			(1,974,765	)
Other income		652,248			639,507			12,741
Total revenues	$	56,106,859		$	55,991,891		$	114,968

The $114,968 increase in total revenues for the nine months ended September 30, 2024 is discussed below.

49

Premiums

Our premiums for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Ordinary life first year	$	2,677,370	$	2,214,800	$	462,570
Ordinary life renewal		6,229,613		4,981,173		1,248,440
Final expense first year		2,572,655		2,638,695		(66,040	)
Final expense renewal		19,267,833		18,846,746		421,087
Total premiums	$	30,747,471	$	28,681,414	$	2,066,057

The $2,066,057 increase in premiums for the nine months ended September 30, 2024 is primarily due to the $1,248,440 increase in ordinary life renewal premiums, $462,570 increase in ordinary life first year premiums and a $421,087 increase in final expense renewal premiums that exceeded a $66,040 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 nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities	$	6,019,101		$	4,627,453		$	1,391,648
Equity securities		76,741			168,718			(91,977	)
Other long-term investments		3,426,374			3,825,719			(399,345	)
Mortgage loans		13,677,004			14,351,796			(674,792	)
Policy loans		211,938			175,680			36,258
Short-term and other investments		1,851,753			2,063,066			(211,313	)
Gross investment income		25,262,911			25,212,432			50,479
Investment expenses		(1,767,450	)		(1,952,286	)		(184,836	)
Net investment income	$	23,495,461		$	23,260,146		$	235,315

The $50,479 increase in gross investment income for the nine months ended September 30, 2024 is primarily due to $1,391,648 increase in fixed maturity securities that exceeded a $674,792 decrease in mortgage loans, $399,345 decrease in other long-term investments and $211,313 decrease in short-term and other investments.

50

The increase in fixed maturity securities investment income is primarily due to increased fixed maturity securities investments of $50.9 million since September 30, 2023. The decrease in mortgage loans investment income is primarily due to decreased mortgage loans investments of $31.9 million since September 30, 2023. The decrease in other long-term investment is primarily due to decreased other long-term investment of $3.8 million since September 2023. The decline in short-term and other investments is primarily due to decreased gross yield of 4.94% in 2024 compared to 7.48% in 2023.

The $184,836 decrease in investment expense for the nine months ended September 30, 2024 is primarily due to decreased mortgage loan cost.

Net Realized Investment Losses

Our net realized investment losses result from sales of fixed maturity securities available-for-sale, equity securities, mortgage loans on real estate, investment real estate, changes in fair value of equity securities and changes in estimate of credit losses.

Our net realized investment losses for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities available-for-sale:
Sale proceeds	$	6,117,457		$	4,428,942		$	1,688,515
Amortized cost at sale date		6,165,912			4,463,033			1,702,879
Net realized losses	$	(48,455	)	$	(34,091	)	$	(14,364	)
Equity securities:
Sale proceeds	$	5		$	-		$	5
Cost at sale date		9			-			9
Net realized losses	$	(4	)	$	-		$	(4	)
Mortgage loans on real estate:
Payment and sale proceeds on mortgage loans	$	105,475,704		$	-		$	105,475,704
Principal collections		105,418,656			-			105,418,656
Net realized gans	$	57,048		$	-		$	57,048
Investment real estate:
Sale proceeds	$	12,637		$	-		$	12,637
Carrying value at sale date		9,494			-			9,494
Net realized gains	$	3,143		$	-		$	3,143
Equity securities, changes in fair value	$	(34,586	)	$	24,599		$	(59,185	)
Changes in current estimate of credit losses	$	(192,224	)	$	(110,642	)	$	(81,582	)
Net realized losses	$	(215,078	)	$	(120,134	)	$	(94,944	)

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.

51

Service Fees

The $1,974,765 decrease in service fees for the nine months ended September 30, 2024 is primarily due to a decrease in fees from Trinity Mortgage Corporation brokering mortgage loans for a fee to third parties.

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 nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Benefits and claims
Increase in future policy benefits	$	10,148,709		$	10,216,279		$	(67,570	)
Death benefits		9,930,857			10,344,418			(413,561	)
Surrenders		1,852,209			1,590,861			261,348
Interest credited to policyholders		11,252,165			11,298,057			(45,892	)
Dividend, endowment and supplementary life contract benefits		276,565			256,515			20,050
Total benefits and claims		33,460,505			33,706,130			(245,625	)
Expenses
Policy acquisition costs deferred		(12,024,147	)		(10,387,913	)		(1,636,234	)
Amortization of deferred policy acquisition costs		7,764,643			6,468,779			1,295,864
Amortization of value of insurance business acquired		141,873			206,787			(64,914	)
Commissions		11,586,116			9,955,977			1,630,139
Other underwriting, insurance and acquisition expenses		8,723,029			8,848,007			(124,978	)
Total expenses		16,191,514			15,091,637			1,099,877
Total benefits, claims and expenses	$	49,652,019		$	48,797,767		$	854,252

The $854,252 increase in total benefits, claims and expenses for the nine months ended September 30, 2024 is discussed below.

Benefits and Claims

The $245,625 decrease in benefits and claims for the nine months ended September 30, 2024 is primarily due to the following:

● $413,561 decrease in death benefits is primarily due to approximately $175,000 decreased ordinary life benefits and $237,000 of decreased final expense benefit.

● $261,348 increase in surrenders is based upon policyholder election and corresponds to the growth in the number of policies in force.

52

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 nine months ended September 30, 2024 and 2023, capitalized costs were $12,024,147 and $10,387,913, respectively. Amortization of deferred policy acquisition costs for the nine months ended September 30, 2024 and 2023 were $7,764,643 and $6,468,779, respectively.

There was a $1,636,234 increase in 2024 acquisition costs deferred primarily relates to increased annuity production with a corresponding increase in deferral of eligible annuity commissions. There was a $1,295,864 increase in the 2024 amortization of deferred acquisition costs due to 2024 life and annuity surrenders and withdrawal activity.

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 $141,873 and $206,787 for the nine months ended September 30, 2024 and 2023, respectively, representing a $64,914 decrease.

Commissions

Our commissions for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Annuity	$	3,245,713	$	2,126,231	$	1,119,482
Ordinary life first year		2,836,555		2,312,523		524,032
Ordinary life renewal		696,710		527,671		169,039
Final expense first year		3,025,890		3,206,040		(180,150	)
Final expense renewal		1,781,248		1,783,512		(2,264	)
Total commissions	$	11,586,116	$	9,955,977	$	1,630,139

The $1,630,139 increase in commissions for the nine months ended September 30, 2024 is primarily due to a $1,119,482 increase annuity commissions (corresponding to $32,836,544 of increased annuity deposits retained), $524,032 increase in ordinary life first year commissions (corresponding to $462,570 increased ordinary life first year premiums) and a $169,039 increase in ordinary life renewal commissions (corresponding to $1,248,440 increased ordinary life renewal premiums) that exceed a $180,150 decrease in final expense first year commissions (corresponding to $66,040 decreased final expense first year premiums).

Other Underwriting, Insurance and Acquisition Expenses

The $124,978 decrease in other underwriting, insurance and acquisition expenses for the nine months ended September 30, 2024 was primarily related to an decrease in advisor fees and legal fees.

Federal Income Taxes

FTFC filed its 2023 consolidated federal income tax return with TLIC, FBLIC and TMC on October 8, 2024. 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.

53

For the nine months ended September 30, 2024 and 2023, current income tax expense was $620,019 and $1,167,431, respectively. Deferred federal income tax expense was $709,404 and $326,460 for the nine months ended September 30, 2024 and 2023, respectively.

Net Income Per Common Share Basic

For the nine months ended September 30, 2024 and 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 nine months ended September 30, 2024, the net income allocated to the Class A shareholders of $5,078,907 is the total net income $5,125,417 less the net income allocated to the Class B shareholders $46,510. For the nine months ended September 30, 2023, the net income allocated to the Class A shareholders of $5,648,507 is the total net income $5,700,233 less the net income allocated to the Class B shareholders $51,726.

The weighted average outstanding common shares basic for the nine months ended September 30, 2024 and 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 and 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 nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,				Amount Change
	2024		2023		2024 less 2023
Revenues:
Life insurance operations	$	36,734,430	$	34,261,450	$	2,472,980
Annuity operations		17,486,538		18,536,138		(1,049,600	)
Corporate operations		1,885,891		3,194,303		(1,308,412	)
Total	$	56,106,859	$	55,991,891	$	114,968
Income (loss) before income taxes:
Life insurance operations	$	4,653,934	$	2,380,841	$	2,273,093
Annuity operations		1,131,076		2,450,351		(1,319,275	)
Corporate operations		669,830		2,362,932		(1,693,102	)
Total	$	6,454,840	$	7,194,124	$	(739,284	)

54

The increases and decreases of revenues and profitability from our business segments for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	2,066,057		$	-		$	-		$	2,066,057
Net invesment income		533,892			(531,274	)		232,697			235,315
Net realized investment losses		(59,933	)		(164,447	)		-			(224,380	)
Service fees and other income		(67,036	)		(353,879	)		(1,541,109	)		(1,962,024	)
Total revenue		2,472,980			(1,049,600	)		(1,308,412	)		114,968
Benefits and claims
Increase in future policy benefits		(67,570	)		-			-			(67,570	)
Death benefits		(413,561	)		-			-			(413,561	)
Surrenders		261,348			-			-			261,348
Interest credited to policyholders		-			(45,892	)		-			(45,892	)
Dividend, endowment and supplementary life contract benefits		20,050			-			-			20,050
Total benefits and claims		(199,733	)		(45,892	)		-			(245,625	)
Expenses
Policy acquisition costs deferred net of amortization		108,195			(448,565	)		-			(340,370	)
Amortization of value of insurance business acquired		(32,457	)		(32,457	)		-			(64,914	)
Commissions		510,657			1,119,482			-			1,630,139
Other underwriting, insurance and acquisition expenses		(186,775	)		(322,893	)		384,690			(124,978	)
Total expenses		399,620			315,567			384,690			1,099,877
Total benefits, claims and expenses		199,887			269,675			384,690			854,252
Income (loss) before federal income taxes expense (benefits)	$	2,273,093		$	(1,319,275	)	$	(1,693,102	)	$	(739,284	)

Consolidated Financial Condition

Our invested assets as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)				Amount Change
	September 30, 2024		December 31, 2023		2024 less 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value
(amortized cost: $200,067,578 and $161,908,230 as of September 30, 2024 and December 31, 2023, respectively)	$	192,537,067	$	149,700,948	$	42,836,119
Equity securities at fair value
(cost: $282,037 and $287,375 as of September 30, 2024 and December 31, 2023, respectively)		379,606		419,530		(39,924	)
Mortgage loans on real estate		206,029,021		239,831,447		(33,802,426	)
Investment real estate		2,452,094		1,305,403		1,146,691
Policy loans		4,067,802		3,474,116		593,686
Short-term investments		751,349		298,257		453,092
Other long-term investments		59,366,184		61,487,939		(2,121,755	)
Total investments	$	465,583,123	$	456,517,640	$	9,065,483

55

The increase in fixed maturity available-for-sale securities for the nine months ended September 30, 2024 and 2023, are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Fixed maturity securities, available-for-sale, beginning	$	149,700,948		$	126,612,890
Purchases		44,428,047			23,059,489
Unrealized appreciation (depreciation)		4,676,771			(2,807,073	)
Net realized investment losses		(240,679	)		(144,733	)
Sales proceeds		(2,882,457	)		(4,428,942	)
Maturities		(3,235,000	)		(505,000	)
Premium amortization		89,437			(133,454	)
Increase		42,836,119			15,040,287
Fixed maturity securities, available-for-sale, ending	$	192,537,067		$	141,653,177

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 primarily in a variety of companies, U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.

The increase and decrease in equity securities for the nine months ended September 30, 2024 and 2023, respectively, are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Equity securities, beginning	$	419,530		$	399,633
Purchases		67,936			104,047
Sales proceeds		(5	)		-
Joint venture distributions		(73,265	)		(100,164	)
Net realized investment losses, sale of securities		(4	)		-
Net realized investment gains (losses), changes in fair value		(34,586	)		24,599
Increase (decrease)		(39,924	)		28,482
Equity securities, ending	$	379,606		$	428,115

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.

56

The decrease in mortgage loans on real estate for the nine months ended September 30, 2024 and 2023, are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Mortgage loans on real estate, beginning	$	239,831,447		$	242,314,128
Purchases		72,776,142			101,131,636
Accretion of discounts (premium amortization)		(19,540	)		1,553
Net realized investment gains		57,048			-
Payments		(105,475,704	)		(105,515,062	)
Foreclosed - transferred to real estate		(1,285,621	)		-
(Increase) decrease in allowance for bad debts		145,249			(17,222	)
Decrease		(33,802,426	)		(4,399,095	)
Mortgage loans on real estate, ending	$	206,029,021		$	237,915,033

The increase in investment real estate for the nine months ended September 30, 2024 is summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Investment real estate, beginning	$	1,305,403		$	540,436
Real estate acquired through mortgage loans foreclosures		1,285,621			-
Net realized investment gains		3,143			-
Loss on impairments		(129,436	)		-
Sales proceeds		(12,637	)		-
Increase		1,146,691			-
Investment real estate, ending	$	2,452,094		$	540,436

The decrease in other long-term investments (composed of lottery receivables) for the nine months ended September 30, 2024 and 2023, are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Other long-term investments, beginning	$	61,487,939		$	67,500,783
Purchases		5,589,676			6,109,759
Accretion of discount		3,426,440			3,825,790
Payments		(11,137,871	)		(14,300,767	)
Decrease		(2,121,755	)		(4,365,218	)
Other long-term investments, ending	$	59,366,184		$	63,135,565

57

Our assets other than invested assets as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)				Amount Change
	September 30, 2024		December 31, 2023		2024 less 2023
Cash and cash equivalents	$	65,104,323	$	33,839,741	$	31,264,582
Accrued investment income		5,428,561		6,214,459		(785,898	)
Recoverable from reinsurers		9,992,701		10,353,674		(360,973	)
Assets held in trust under coinsurance agreement		34,582,412		79,940,459		(45,358,047	)
Agents' balances and due premiums		1,401,266		1,284,003		117,263
Deferred policy acquisition costs		65,038,520		60,795,108		4,243,412
Value of insurance business acquired		3,635,480		3,777,353		(141,873	)
Other assets		15,693,785		19,299,098		(3,605,313	)
Assets other than investment assets	$	200,877,048	$	215,503,895	$	(14,626,847	)

The $31,264,582 increase in cash and cash equivalents is discussed below in the “Liquidity and Capital Resources” section where cash flows are addressed.

The $45,358,047 decrease in assets held in trust under the coinsurance agreement is due to a reduction in assets under TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company that is administered on a funds withheld basis.

The increase in deferred policy acquisition costs for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Balance, beginning of year	$	60,795,108		$	56,183,785
Capitalization of commissions, sales and issue expenses		12,024,147			10,387,913
Amortization		(7,764,643	)		(6,468,779	)
Deferred acquisition costs allocated to investments		(16,092	)		340
Increase		4,243,412			3,919,474
Balance, end of period	$	65,038,520		$	60,103,259

58

Our other assets as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)				Amount Change
	September 30, 2024		December 31, 2023		2024 less 2023
Receivables for securities	$	5,002,173	$	-	$	5,002,173
Advances to mortgage loan originator		4,542,681		4,487,715		54,966
Federal and state income taxes recoverable		4,500,393		10,845,790		(6,345,397	)
Guaranty funds		769,413		723,767		45,646
Accrued management fee		379,596		345,148		34,448
Lease asset - right to use		295,286		369,107		(73,821	)
Prepaid assets and deposits		171,093		141,172		29,921
Receivables from lottery vendor		-		278,207		(278,207	)
Notes receivable		32,737		44,319		(11,582	)
Other receivables		413		18,682		(18,269	)
Advances to an independently owned investment firm		-		2,045,191		(2,045,191	)
Total other assets	$	15,693,785	$	19,299,098	$	(3,605,313	)

There was a $6,345,397 decrease in federal and state income taxes recoverable primarily due to receiving a federal income tax refund of $8,087,076 for the tax years 2020, 2021 and 2022.

There was a $2,045,191 decrease in advances to an independently owned investment firm due to the full repayment of a promissory note.

There was a $278,207 decrease in receivables from a lottery vendor.

As of September 30, 2024, the Company had $5,002,173 in security receivables where the trade date and settlement date were in different financial reporting periods.

Our liabilities as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)				Amount Change
	September 30, 2024		December 31, 2023		2024 less 2023
Policy liabilities
Policyholders' account balances	$	397,299,695	$	391,247,676	$	6,052,019
Future policy benefits		133,670,392		123,729,530		9,940,862
Policy claims		2,530,121		2,410,243		119,878
Other policy liabilities		255,598		250,294		5,304
Total policy liabilities		533,755,806		517,637,743		16,118,063
Funds withheld under coinsurance agreement		33,686,270		77,257,253		(43,570,983	)
Deferred federal income taxes		5,916,337		4,228,189		1,688,148
Other liabilities		20,278,198		8,882,142		11,396,056
Total liabilities	$	593,636,611	$	608,005,327	$	(14,368,716	)

59

The increase in policyholders’ account balances for the nine months ended September 30, 2024 and 2023, are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,
	2024			2023
Policyholders' account balances, beginning	$	391,247,676		$	391,359,944
Deposits		99,736,795			66,492,731
Withdrawals		(151,653,839	)		(76,096,655	)
Change in funds withheld under coinsurance agreement		46,716,898			11,013,097
Interest credited		11,252,165			11,298,057
Increase		6,052,019			12,707,230
Policyholders' account balances, ending	$	397,299,695		$	404,067,174

The $9,940,862 increase in future policy benefits during the nine months ended September 30, 2024 is primarily related to the production of new life insurance policies and the aging of existing policies an additional year.

The $43,570,983 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.

The $1,688,148 increase in deferred federal income taxes during the nine months ended September 30, 2024 was due to $978,744 of increased deferred federal income taxes on the unrealized appreciation of fixed maturity securities and preferred stock available-for-sale and $709,404 of operating deferred federal tax expense.

Our other liabilities as of September 30, 2024 and December 31, 2023 are summarized as follows:

	(Unaudited)						Amount Change
	September 30, 2024			December 31, 2023			2024 less 2023
Suspense accounts payable	$	13,865,903		$	800,262		$	13,065,641
Mortgage loans suspense		3,829,978			5,841,113			(2,011,135	)
Accrued expenses payable		613,000			696,000			(83,000	)
Guaranty fund assessments		713,000			713,000			-
Payable for securities purchased		5,332			7,082			(1,750	)
Unclaimed funds		505,562			488,492			17,070
Lease liability		295,286			369,107			(73,821	)
Accounts payable		374,281			53,804			320,477
Unearned investment income		138,314			115,166			23,148
Deferred revenue		33,000			41,250			(8,250	)
Other payables, withholdings and escrows		(95,458	)		(243,134	)		147,676
Total other liabilities	$	20,278,198		$	8,882,142		$	11,396,056

The $13,065,641 increase in suspense accounts payable is due to increased deposits on policy applications that had not been issued as of the financial reporting date.

The $320,477 increase in account payable is primarily amounts owed to a lottery vendor and a consultant.

The $147,676 increase in other payables, withholdings and escrows is primarily due to a decrease in escrow advances.

The decrease in mortgage loan suspense of $2,011,135 is primarily due to timing of principal loan payments on mortgage loans.

60

Liquidity and Capital Resources

Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through September 30, 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 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.

As of September 30, 2024, we had cash and cash equivalents totaling $65,104,323. As of September 30, 2024, cash and cash equivalents of $35,844,116 and $22,693,515, respectively, totaling $58,537,631 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the Oklahoma Insurance Department of any dividend or intercompany transaction to transfer funds to FTFC. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year.

Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $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. FBLIC has paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC in 2024 and 2023.

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 $53,602,786 and $26,017,084 as of September 30, 2024 and December 31, 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.

61

Our cash flows for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Net cash provided by operating activities	$	89,277,189		$	18,745,438		$	70,531,751
Net cash used in investing activities		(6,095,563	)		(4,558,375	)		(1,537,188	)
Net cash used in financing activities		(51,917,044	)		(9,603,924	)		(42,313,120	)
Increase in cash and cash equivalents		31,264,582			4,583,139			26,681,443
Cash and cash equivalents, beginning of period		33,839,741			33,542,725			297,016
Cash and cash equivalents, end of period	$	65,104,323		$	38,125,864		$	26,978,459

The cash provided by operating activities for the nine months ended September 30, 2024 and 2023 are summarized as follows:

	(Unaudited)
	Nine Months Ended September 30,						Amount Change
	2024			2023			2024 less 2023
Premiums collected	$	30,780,030		$	28,578,567		$	2,201,463
Net investment income collected		20,808,170			18,115,381			2,692,789
Service fees and other income collected		2,173,993			3,891,963			(1,717,970	)
Death benefits paid		(9,450,006	)		(10,318,049	)		868,043
Surrenders paid		(1,852,209	)		(1,590,861	)		(261,348	)
Dividends and endowments paid		(278,059	)		(258,277	)		(19,782	)
Commissions paid		(11,729,141	)		(10,048,411	)		(1,680,730	)
Other underwriting, insurance and acquisition expenses paid		(8,538,288	)		(8,902,498	)		364,210
Taxes received (paid)		5,725,378			(2,825,166	)		8,550,544
Decreased advances to a independently owned investement firm		2,045,191			-			2,045,191
Decreased advances to an investment vendor		296,477			-			296,477
(Increased) decreased advances to mortgage loan originator		(54,966	)		130,230			(185,196	)
Increased (decreased) deposits of pending policy applications		13,065,641			(9,435,101	)		22,500,742
Decreased funds under coinsurance agreement		48,503,962			10,567,882			37,936,080
Increased (decreased) mortgage loan suspense		(2,011,136	)		1,013,151			(3,024,287	)
Other		(207,848	)		(173,373	)		(34,475	)
Net cash provided by operating activities	$	89,277,189		$	18,745,438		$	70,531,751

Please see the statements of cash flows for the nine months ended September 30, 2024 and 2023 for a summary of the components of net cash used in investing activities and net cash provided by financing activities.

62

Our shareholders’ equity as of September 30, 2024 and December 31, 2023 is summarized as follows:

	(Unaudited)						Amount Change
	September 30, 2024			December 31, 2023			2024 less 2023
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of September 30, 2024 and December 31, 2023, 9,631,920 issued as of September 30, 2024 and December 31, 2023, 9,384,340 outstanding as of September 30, 2024 and December 31, 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 September 30, 2024 and December 31, 2023)		1,011			1,011			-
Additional paid-in capital		43,668,023			43,668,023			-
Treasury stock, at cost (247,580 shares as of September 30, 2024 and December 31, 2023)		(893,947	)		(893,947	)		-
Accumulated other comprehensive loss		(5,959,373	)		(9,641,308	)		3,681,935
Accumulated earnings		35,911,527			30,786,110			5,125,417
Total shareholders' equity	$	72,823,560		$	64,016,208		$	8,807,352

The increase in shareholders’ equity of $8,807,352 for the nine months ended September 30, 2024 is due to $5,125,417 in net income and a $3,681,935 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 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 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 $7,530,511 and $12,207,282 as of September 30, 2024 and December 31, 2023, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. A decrease of $4,628,316 in unrealized losses arising for the nine months ended September 30, 2024 has been decreased by 2024 net realized investment losses of $48,455 originating from the sale and call activity for fixed maturity securities available-for-sale resulting in net unrealized losses on investments of $4,676,771.

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.

63

As of September 30, 2024, 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 15.9% 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.

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 2023, 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 September 30, 2024, the Company has outstanding advances to this loan originator totaling $4,542,681. The advances are secured by $8,192,174 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $1,457,319 to the loan originator that would result in additional security in the form of residential mortgage loans on real estate to be assigned to the Company.

Effective January 1, 2019, the Company also entered into a revised escrow agreement with the same loan originator. According to the revised terms of the escrow agreement, as of September 30, 2024, $1,127,400 of additional and secured residential mortgage loan balances on real estate are held in escrow by the Company.  As of September 30, 2024, $1,111,014 of that escrow amount is available to the Company as additional collateral on $4,542,681 of advances to the loan originator. The remaining September 30, 2024 escrow amount of $16,386 is available to the Company as additional collateral on its investment of $3,277,276 in residential mortgage loans on real estate.

We are not aware of any commitments or unusual events that could materially affect our capital resources. We are not aware of any current recommendations by any regulatory authority which, if implemented, would have a material adverse effect on our liquidity, capital resources or operations. We believe that our existing cash and cash equivalents as of September 30, 2024 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.

64

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;

● 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 as amended (“Exchange Act”) as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is made known to management, including our Certifying Officers, as appropriate, to allow timely decisions regarding disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

65

Changes to Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to various legal proceedings in the ordinary course of business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from them will not have a material effect on the Company’s financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. As summarized below, the Company is currently involved in 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 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 these lawsuits are not material in relation to the Company’s financial position or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

66

Item 5. Other Information

None

Item 6. Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1 Section 1350 Certification of Principal Executive Officer

32.2 Section 1350 Certification of Principal Financial Officer

101.INS** Inline XBRL Instance

101.SCH** Inline XBRL Taxonomy Extension Schema

101.CAL** Inline XBRL Taxonomy Extension Calculation

101.DEF** Inline XBRL Taxonomy Extension Definition

101.LAB** Inline XBRL Taxonomy Extension Labels

101.PRE** Inline XBRL Taxonomy Extension Presentation

104 Cover Page Interactive Data (formatted as Inline XBRL and continued in Exhibit 101)

**XBRL Information is furnished and not filed as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

67

SIGNATURES

In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FIRST TRINITY FINANCIAL CORPORATION          an Oklahoma corporation
November 14, 2024	By:	/s/ Gregg E. Zahn
	Gregg E. Zahn, President and Chief Executive Officer

November 14, 2024	By:	/s/ Jeffrey J. Wood
	Jeffrey J. Wood, Chief Financial Officer

68