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United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2024

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

For the transition period Fromto.

Commission file number 000-52613

FIRST TRINITY FINANCIAL CORPORATION

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

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

7633 East 63rd Place, Suite 230

Tulsa, Oklahoma

74133-1246

(Address of principal executive offices)

(918) 249-2438

(Issuer's telephone number)

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

Title of Each Class

None

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

Title of Each Class

Class A Common Stock, $0.01 Par Value

Class B Common Stock, $0.01 Par Value

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

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

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

Yes ☐ No ☒

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

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 10, 2025, the registrant had 9,384,340 shares of Class A common stock, 0.01 par value, outstanding and 101,102 shares of Class B common stock, 0.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

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

FIRST TRINITY FINANCIAL CORPORATION

TABLE OF CONTENTS

Part I

Item 1.	Business	4
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosures	11

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	11
Item 6	Reserved	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 8.	Financial Statements	36
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	85
Item 9A.	Controls and Procedures	85
Item 9B.	Other Information	86

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	87
Item 11.	Executive Compensation	91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	97
Item 13.	Certain Relationships and Related Transactions, and Director Independence	98
Item 14.	Principal Accounting Fees and Services.	99
Item 15.	Exhibits	100
Item 16.	Form 10-K Summary	100
Exhibit index		101
Signatures		102

Exhibit 21.1

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

Exhibit No. 101.INS

Exhibit No. 101.SCH

Exhibit No. 101.CAL

Exhibit No. 101.DEF

Exhibit No. 101.LAB

Exhibit No. 101.PRE

PART I

Item 1. Business

Business Development

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

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

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

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

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

Company Capitalization

Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through December 31, 2024, we have received $27,119,480 from the sale of our shares. The Company raised $1,450,000 from two private placements during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012 and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.

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

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

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

Acquisitions

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

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

On August 31, 2009, two of the Company’s subsidiaries, Trinity Life Insurance Company (“Old TLIC”) and FLAC, were merged, with FLAC being the surviving company. Immediately following the merger, FLAC changed its name to TLIC.

On December 28, 2011, TLIC acquired 100% of the outstanding common stock of FBLIC from FBLIC’s shareholders. The acquisition of FBLIC was accounted for as a purchase. The aggregate purchase price for the acquisition of FBLIC was $13,855,129. The acquisition of FBLIC was financed with the working capital of TLIC.

On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $3,644,839 (including cash), assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.

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

Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.

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

Financial Information about Segments

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

Our business segments are as follows:

●

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

●

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

●

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

Please see Item 8 below and Note 11 to the consolidated financial statements as of and for the years ended December 31, 2024 and 2023 for additional information regarding segment information.

Life Insurance and Annuity Operations

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

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

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

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

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

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

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

	Year Ended December 31, 2024
	Life					Annuity
State	Premiums		Percentage			Considerations		Percentage
Alabama	$	940,009		2.93	%	$	22,306		0.02	%
Arizona		555,660		1.73	%		1,209,314		0.86	%
Arkansas		703,355		2.19	%		190,258		0.14	%
Colorado		1,015,152		3.17	%		909		0.00	%
Florida		89,843		0.28	%		1,550,448		1.11	%
Georgia		1,711,581		5.34	%		3,185,002		2.27	%
Illinois		1,950,364		6.09	%		1,205,801		0.86	%
Indiana		1,318,628		4.11	%		6,494,206		4.64	%
Kansas		1,624,449		5.07	%		6,474,856		4.62	%
Kentucky		1,012,984		3.16	%		526,578		0.38	%
Louisiana		977,336		3.05	%		-		0.00	%
Michigan		723,454		2.26	%		2,302,557		1.64	%
Minnesota		5,344		0.02	%		1,018,473		0.73	%
Mississippi		527,418		1.65	%		707,675		0.51	%
Missouri		1,592,662		4.97	%		1,993,787		1.42	%
Nebraska		410,874		1.28	%		11,620,434		8.30	%
North Carolina		3,604,383		11.25	%		26,167,970		18.68	%
North Dakota		77,322		0.24	%		25,914,663		18.50	%
Ohio		3,332,358		10.40	%		2,196,163		1.57	%
Oklahoma		1,012,009		3.16	%		6,358,136		4.54	%
Pennsylvania		1,097,077		3.42	%		1,606,370		1.15	%
South Carolina		38,131		0.12	%		791,246		0.56	%
South Dakota		14,725		0.05	%		900,236		0.64	%
Tennessee		1,226,524		3.83	%		1,005,778		0.72	%
Texas		4,799,546		14.96	%		33,003,935		23.55	%
Virginia		1,044,554		3.26	%		2,458,685		1.76	%
All other states		645,640		2.01	%		1,163,091		0.83	%
Total direct collected premiums and considerations	$	32,051,382		100.00	%	$	140,068,877		100.00	%

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

Reinsurance

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

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

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

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

Coinsurance

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

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

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

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

Competition

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

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

Governmental Regulation

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

TLIC and FBLIC are subject to Oklahoma laws that limit the amount of dividends insurance companies can pay to stockholders without approval of the Departments of Insurance. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC.

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

Employees

As of March 10, 2025, the Company had nineteen full-time employees.

Item 2. Properties

TLIC owns approximately three acres of undeveloped land located in Topeka, Kansas with a carrying value of $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 sold investment real estate property with an aggregate carrying value of $265,705. The Company recorded a gross realized investment gain on sale of $11,251 based on an aggregate sales price of $276,956.

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

Item 3. Legal Proceedings

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

A lawsuit filed by the Company and its Chairman and Chief Executive Officer, Gregg E. Zahn (“Mr. Zahn”) styled First Trinity Financial Corporation and Gregg E. Zahn vs. C. Wayne Pettigrew and Group & Pension Planners was originally filed in 2013 in the District Court of Tulsa County, Oklahoma against former Company Board of Director, C. Wayne Pettigrew (“Mr. Pettigrew”). The Company and Mr. Zahn alleged that Mr. Pettigrew defamed Mr. Zahn and the Company and that Mr. Pettigrew breached his fiduciary duties to the Company by making untrue statements about the Company and Mr. Zahn to the press, state regulators and to certain shareholders.

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

The Company, through its life insurance subsidiary, TLIC, commenced two lawsuits as plaintiff, both in the New York Supreme Court, New York County, one on June 29, 2020 and another on March 4, 2022, for breach of contract against a company for failure to advance funding to lottery ticket winners to the detriment of TLIC and against various of that company’s associated persons for unjust enrichment and fraud perpetuated on TLIC. The cases are entitled “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, and Monica L. Ray, Index No. 652780/2020” (New York Supreme Court, New York County) and “Trinity Life Insurance Company v. Advance Funding LLC, Dan Cevallos, Julie Casal, and Monica L. Ray, Index No. 651023/2022” (New York Supreme Court, New York County). The Company is vigorously prosecuting this case against the defendants. The Company faces no exposure in connection with either action since no counterclaims or cross claims have been made against the Company. Management believes that these lawsuits are not material in relation to the Company’s financial position or results of operations.

Item 4. Mine Safety Disclosures

None

PART II

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

(a)

Market Information

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

(b)

Holders

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

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

(c)

Dividends

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

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

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

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

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

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

(d)

Securities Authorized for Issuance Under Equity Compensation Plans

In March 2020, our Board formally adopted the 2019 Equity Incentive Plan which had been previously approved by our shareholders in 2019. Under the Plan, up to 1,000,000 shares of Class A Common Stock are authorized for issuance. No awards have been granted or shares issued pursuant to the Plan.

(e)

Performance Graph – Not Required

(f)

Purchases of Equity Securities by Issuer

The Company did not repurchase any of its shares of common stock during 2024 or 2023.

Item 6. Reserved

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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

As an insurance provider, we collect premiums in the current period to pay future benefits to our policy and contract holders. Our core TLIC and FBLIC operations include issuing modified premium whole life insurance with a flexible premium deferred annuity, ordinary whole life, final expense, term and annuity products to predominately middle income households in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia through independent agents.

We also realize revenues from our investment portfolio, which is a key component of our operations. The revenues we collect as premiums from policyholders are invested to ensure future benefit payments under the policy contracts. Life insurance companies earn profits on the investment spread, which reflects the investment income earned on the premiums paid to the insurer between the time of receipt and the time benefits are paid out under policies. Changes in interest rates, changes in economic conditions and volatility in the capital markets can all impact the amount of earnings that we realize from our investment portfolio.

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

Acquisitions

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

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

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

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

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

Critical Accounting Policies and Estimates

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

The Company considers its most critical accounting estimates to be those applied to investments in fixed maturities securities, mortgage loans on real estate, deferred policy acquisition costs, value of insurance business acquired and future policy benefits.

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

Investments in Fixed Maturity Securities

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.

Mortgage Loans on Real Estate

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

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

The statement of operations reflects the measurement of credit losses for newly recognized mortgage loans as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported mortgage loan balances. The Company uses judgment in determining the relevant information and estimation methods that are appropriate in establishing the valuation allowance for credit losses. The allowance for credit losses for mortgage loans with a more-than-insignificant amount of credit determination since origination is determined and the initial allowance for credit losses should be added to the purchase price of mortgage loans rather than being reported as a credit loss expenses.

The Company, however, has established and will continue to establish a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow based on historical patterns. The Company’s foreclosed properties have not resulted in accumulated losses and due to the low loan-to-value the Company holds with respect to its mortgage loans, the Company has not recorded and does not expect to record the addition to the purchase price of mortgage loans an initial allowance for credit losses to be amortized over the life of the mortgage loans. The Company will continue to record credit losses for mortgage loans not supported by funds held in escrow in accordance with its valuation policy for mortgage loans on real estate followed before 2023.

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

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

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

Deferred Policy Acquisition Costs

Commissions and other acquisition costs which vary with and are primarily related to the successful production of new and renewal insurance contracts are deferred and amortized in a systematic manner based on the related contract revenues or gross profits as appropriate. The recovery of deferred acquisition costs is dependent on the future profitability of the underlying business for which acquisition costs were incurred. Each reporting period, we evaluate the recoverability of the unamortized balance of deferred acquisition costs. We consider estimated future gross profits or future premiums; expected mortality or morbidity; interest earned and credited rates; persistency and expenses in determining whether the balance is recoverable.

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

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

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

Value of Insurance Business Acquired

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

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

Future Policy Benefits

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

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

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

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

Adopted Accounting Standards

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

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

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

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

Troubled Debt Restructurings and Vintage Disclosures

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

Improvements to Reportable Segment Disclosures

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

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

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

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

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

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

Recent Accounting Pronouncements

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued updated guidance (Accounting Standards Update 2018-12) to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. This update improves the timeliness of recognizing changes in the liability for future policy benefits, modifies the rate used to discount future cash flows, simplifies and improves accounting for certain market-based options or guarantees associated with deposit (i.e., account balance) contracts, simplifies the amortization of deferred acquisitions costs and expands required disclosures. The expanded disclosure requires an insurance entity to provide disaggregated roll forwards of beginning to ending balances of the following: liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs including disclosure about, changes to and effect of changes for significant inputs, judgments, assumptions and methods used in measurements.

The updated guidance was effective for reporting periods beginning after December 15, 2020. As a Smaller Reporting Company, the effective date has been changed twice and the delayed effective date is now for reporting periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted but not likely to be elected by the Company. With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, an insurance entity may elect to apply the amendments retrospectively as of the beginning of the earliest period presented. With respect to the market risk benefits, an insurance entity should apply the amendments retrospectively as of the beginning of the earliest period presented. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2025 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.

Transition for Sold Contracts

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

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

Improvements to 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 the information required by this Update for year-end reporting in 2025.

Expense Disaggregation Disclosures

In November 2024, the FASB issued amendments (Accounting Standards Update 2024-03) to disclose more granular information about costs of sales and general and administrative expenses including employee compensation to improve the disclosure about a public enterprise’s expenses by providing more detailed information about the types of expenses commonly presented in expense captions such as costs of sales and general and administrative expenses.

The amendments in this Update require disclosing, in the notes to the financial statements, the following specified information about costs and expenses included in general captions on the face of the financial statements at each interim and annual reporting period of the entity: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion and amortization recognized as part of oil and gas producing activities or other amounts of depletion expenses.

An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In addition, the amendments in this Update do not change or remove current expense disclosure requirements including those of specialized industries.

The amendments to this Update are effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company anticipates adopting and disclosing the information required by this Update for year-end reporting in 2027 and interim reporting beginning in first quarter 2028.

Debt With Conversion and Other Options

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

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

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

FINANCIAL HIGHLIGHTS

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

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Premiums	$	41,878,896		$	38,912,934		$	2,965,962
Net investment income		30,522,580			31,655,321			(1,132,741	)
Net realized investment gains (losses)		264,821			(180,152	)		444,973
Loss on impairments		(129,436	)		-			(129,436	)
Service fees		3,161,535			4,701,960			(1,540,425	)
Other income		652,793			666,409			(13,616	)
Total revenues		76,351,189			75,756,472			594,717
Benefits and claims		46,482,298			46,141,488			340,810
Expenses		21,792,600			19,552,536			2,240,064
Total benefits, claims and expenses		68,274,898			65,694,024			2,580,874
Income before federal income tax expense		8,076,291			10,062,448			(1,986,157	)
Federal income tax expense		1,659,500			2,147,087			(487,587	)
Net income	$	6,416,791		$	7,915,361		$	(1,498,570	)
Net income per common share
Class A common stock	$	0.6776		$	0.8358		$	(0.1582	)
Class B common stock	$	0.5759		$	0.7104		$	(0.1345	)

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

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


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

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

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

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

Revenues

Our primary sources of revenue are life insurance premium income and investment income. Premium payments are classified as first-year, renewal and single. In addition, realized gains and losses on investment holdings can significantly impact revenues from period to period.

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

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Premiums	$	41,878,896		$	38,912,934		$	2,965,962
Net investment income		30,522,580			31,655,321			(1,132,741	)
Net realized investment gains (losses)		264,821			(180,152	)		444,973
Loss on impairments		(129,436	)		-			(129,436	)
Service fees		3,161,535			4,701,960			(1,540,425	)
Other income		652,793			666,409			(13,616	)
Total revenues	$	76,351,189		$	75,756,472		$	594,717

The $594,717 increase in total revenues for the year ended December 31, 2024 is discussed below.

Premiums

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

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

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

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

Net Investment Income

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

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities	$	8,534,951		$	6,550,360		$	1,984,591
Equity securities		135,911			118,780			17,131
Other long-term investments		4,444,639			4,948,734			(504,095	)
Mortgage loans		17,079,731			19,678,014			(2,598,283	)
Policy loans		291,170			240,385			50,785
Short-term and other investments		2,531,767			2,600,099			(68,332	)
Gross investment income		33,018,169			34,136,372			(1,118,203	)
Investment expenses		(2,495,589	)		(2,481,051	)		14,538
Net investment income	$	30,522,580		$	31,655,321		$	(1,132,741	)

The $1,118,203 decrease in gross investment income for the year ended December 31, 2024 is primarily due to $2,598,283 decrease in mortgage loans and a $504,095 decrease in other long-term investments that exceeded a $1,984,591 increase in fixed maturity securities.

The decrease in mortgage loans investment income is primarily due to decreased mortgage loans investments of $30.5 million since December 31, 2023. The decrease in other long-term investment is primarily due to decreased other long-term investment of $3.3 million since December 31, 2023. The increase in fixed maturity securities investment income is primarily due to increased fixed maturity securities investments of $64.0 million since December 31, 2023.

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, other long-term investments, 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 years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Fixed maturity securities available-for-sale:
Sale proceeds and maturities	$	15,179,021		$	5,287,601		$	9,891,420
Amortized cost at sale date		15,278,204			5,339,617			9,938,587
Net realized losses	$	(99,183	)	$	(52,016	)	$	(47,167	)
Equity securities at fair value:
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	$	173,048,603		$	132,634,814		$	40,413,789
Cost at sale date		172,348,722			132,632,318			39,716,404
Net realized gains	$	699,881		$	2,496		$	697,385
Other long-term investments:
Sales proceeds	$	17,288,490		$	-		$	17,288,490
Cost at sale date		17,242,840			-			17,242,840
Net realized gains	$	45,650		$	-		$	45,650
Investment real estate:
Sale proceeds	$	276,956		$	-		$	276,956
Carrying value at sale date		265,705			-			265,705
Net realized gains	$	11,251		$	-		$	11,251

Equity securities, changes in fair value	$	(97,284	)	$	8,653		$	(105,937	)
Changes in current estimate of credit losses	$	(295,490	)	$	(139,285	)	$	(156,205	)

Net realized investment gains (losses)	$	264,821		$	(180,152	)	$	444,973

Loss on Impairments

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

Service Fees

The $1,540,425 decrease in service fees for the year ended December 31, 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 years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Benefits and claims
Increase in future policy benefits	$	14,565,010		$	14,212,615		$	352,395
Death benefits		13,176,508			14,298,818			(1,122,310	)
Surrenders		2,471,376			2,173,694			297,682
Interest credited to policyholders		15,880,681			15,093,685			786,996
Dividend, endowment and supplementary life contract benefits		388,723			362,676			26,047
Total benefits and claims		46,482,298			46,141,488			340,810
Expenses
Policy acquisition costs deferred		(16,620,462	)		(13,476,834	)		(3,143,628	)
Amortization of deferred policy acquisition costs		10,775,374			8,863,514			1,911,860
Amortization of value of insurance business acquired		183,913			270,752			(86,839	)
Commissions		16,030,481			12,803,764			3,226,717
Other underwriting, insurance and acquisition expenses		11,423,294			11,091,340			331,954
Total expenses		21,792,600			19,552,536			2,240,064
Total benefits, claims and expenses	$	68,274,898		$	65,694,024		$	2,580,874

The $2,580,874 increase in total benefits, claims and expenses for the year ended December 31, 2024 is discussed below.

Benefits and Claims

The $340,810 increase in total benefits and claims for the year ended December 31, 2024 is primarily due to the following:

●

$786,996 increase in interest credited to policyholders is primarily due to an increase in the crediting rate on new annuity contracts issued during 2024 compared to annuity contracts surrendered during 2024.

●

$352,395 increase in future policy benefits is primarily due to the increased number of life policies in force and the aging of existing life policies.

●

$297,682 increase in surrenders is based upon policyholder election.

●

$1,122,310 decrease in death benefits is primarily due to approximately $658,000 of decreased ordinary life benefits and $464,000 of decreased 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.

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

For the years ended December 31, 2024 and 2023, capitalized costs were $16,620,462 and $13,476,834, respectively. Amortization of deferred policy acquisition costs for the years ended December 31, 2024 and 2023 were $10,775,374 and $8,863,514.

The $3,143,628 increase in the 2024 acquisition costs deferred primarily relates to increased annuity production with a corresponding increase in deferral of eligible annuity commissions. There was a $1,911,860 increase in the 2024 amortization of deferred acquisition costs primarily due to 2024 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 $183,913 and $270,752 for the years ended December 31, 2024 and 2023, respectively.

Commissions

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

	Years Ended December 31,				Amount Change
	2024		2023		2024 less 2023
Annuity	$	4,637,570	$	2,204,946	$	2,432,624
Ordinary life first year		3,977,122		3,224,247		752,875
Ordinary life renewal		999,372		750,566		248,806
Final expense first year		4,033,281		4,245,077		(211,796	)
Final expense renewal		2,383,136		2,378,928		4,208
Total commissions	$	16,030,481	$	12,803,764	$	3,226,717

The $3,226,717 increase in commissions for the year ended December 31, 2024 is primarily due to a $2,432,624 increase annuity commissions (corresponding to $71,630,897 of increased annuity deposits retained) and a $752,875 increase in ordinary life first year commissions (corresponding to $668,529 increased ordinary life first year premiums) and a $248,806 increase in ordinary life renewal commissions (corresponding to $1,743,689 increased ordinary life renewal premiums).

Other Underwriting, Insurance and Acquisition Expenses

The $331,954 increase in other underwriting, insurance and acquisition expenses for the year ended December 31, 2024 was primarily related to an increase in guaranty fund assessment fees and third party administrative fees.

Federal Income Taxes

FTFC files a consolidated federal income tax return with TLIC, FBLIC and TMC. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.

For the years ended December 31, 2024 and 2023, current income tax expense was $1,496,626 and $1,778,778, respectively. Deferred federal income tax expense was $162,874 and $368,309 for the years ended December 31, 2024 and 2023, respectively.

Net Income Per Common Share Basic

For the year ended December 31, 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 year ended December 31, 2024, the net income allocated to the Class A shareholders of $6,358,563 is the total net income $6,416,791 less the net income allocated to the Class B shareholders $58,228. For the year ended December 31, 2023, the net income allocated to the Class A shareholders of $7,843,534 is the total net income $7,915,361 less the net income allocated to the Class B shareholders $71,827.

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

Business Segments

The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment.

The revenues and income before federal income taxes from our business segments for the years ended December 31, 2024 and 2023 are summarized as follows:

	Years Ended December 31,				Amount Change
	2024		2023		2024 less 2023
Revenues:
Life insurance operations	$	49,727,760	$	46,859,649	$	2,868,111
Annuity operations		24,102,511		24,531,347		(428,836	)
Corporate operations		2,520,918		4,365,476		(1,844,558	)
Total	$	76,351,189	$	75,756,472	$	594,717
Income before federal income taxes:
Life insurance operations	$	5,897,565	$	3,463,203	$	2,434,362
Annuity operations		945,053		3,453,174		(2,508,121	)
Corporate operations		1,233,673		3,146,071		(1,912,398	)
Total	$	8,076,291	$	10,062,448	$	(1,986,157	)

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

	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	2,965,962		$	-		$	-		$	2,965,962
Net invesment income		(337,189	)		(1,135,787	)		340,235			(1,132,741	)
Net realized investment gains less impairments		80,881			234,656			-			315,537
Service fees and other income		158,457			472,295			(2,184,793	)		(1,554,041	)
Total revenue		2,868,111			(428,836	)		(1,844,558	)		594,717

Benefits and claims
Increase in future policy benefits		352,395			-			-			352,395
Death benefits		(1,122,310	)		-			-			(1,122,310	)
Surrenders		297,682			-			-			297,682
Interest credited to policyholders		-			786,996			-			786,996
Dividend, endowment and supplementary life contract benefits		26,047			-			-			26,047
Total benefits and claims		(446,186	)		786,996			-			340,810
Expenses
Policy acquisition costs deferred net of amortization		135,701			(1,367,469	)		-			(1,231,768	)
Amortization of value of insurance business acquired		(43,420	)		(43,419	)		-			(86,839	)
Commissions		794,093			2,432,624			-			3,226,717
Other underwriting, insurance and acquisition expenses		(6,439	)		270,553			67,840			331,954
Total expenses		879,935			1,292,289			67,840			2,240,064
Total benefits, claims and expenses		433,749			2,079,285			67,840			2,580,874
Income (loss) before federal income tax expense (benefit)	$	2,434,362		$	(2,508,121	)	$	(1,912,398	)	$	(1,986,157	)

Consolidated Financial Condition

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

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

Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)	$	213,745,821	$	149,700,948	$	64,044,873
Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)		5,336,062		419,530		4,916,532
Mortgage loans on real estate		209,364,504		239,831,447		(30,466,943	)
Investment real estate		2,351,549		1,305,403		1,046,146
Policy loans		4,367,534		3,474,116		893,418
Short-term investments		-		298,257		(298,257	)
Other long-term investments		58,223,514		61,487,939		(3,264,425	)
Total investments	$	493,388,984	$	456,517,640	$	36,871,344

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

	Years Ended December 31,
	2024			2023
Fixed maturity securities, available-for-sale, beginning	$	149,700,948		$	126,612,890
Purchases		81,180,014			23,059,491
Unrealized appreciation (depreciation)		(1,750,599	)		5,632,801
Net realized investment losses		(394,673	)		(191,301	)
Sales proceeds		(11,744,021	)		(457,601	)
Maturities		(3,435,000	)		(4,830,000	)
Accretion of discounts (premium amortization)		189,152			(125,332	)
Increase		64,044,873			23,088,058
Fixed maturity securities, available-for-sale, ending	$	213,745,821		$	149,700,948

Fixed maturity securities available-for-sale are reported at fair value with unrealized gains and losses, net of applicable income taxes, reflected as a separate component in shareholders’ equity within accumulated other comprehensive loss. The available-for-sale fixed maturity securities portfolio is invested in U.S. government and U.S. government agencies, state and political subdivisions, U.S. government agency mortgage backed securities, commercial and residential mortgage-backed securities, corporate bonds, asset-backed securities, exchange traded securities, foreign bonds and redeemable preferred stocks.

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

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

Equity securities are reported at fair value with the change in fair value reflected in net realized investment gains (losses) within the consolidated statements of operations.

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

	Years Ended December 31,
	2024			2023
Mortgage loans on real estate, beginning	$	239,831,447		$	242,314,128
Purchases		143,991,455			130,956,402
Accretion of discounts (premium amortization)		(796,526	)		1,856
Net realized investment gains		699,881			2,496
Payments		(173,048,603	)		(132,634,814	)
Foreclosed - transferred to real estate		(1,441,287	)		(764,967	)
(Increase) decrese in allowance for bad debts		128,137			(43,654	)
Decrease		(30,466,943	)		(2,482,681	)
Mortgage loans on real estate, ending	$	209,364,504		$	239,831,447

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

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

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

	Years Ended December 31,
	2024			2023
Other long-term investments, beginning	$	61,487,939		$	67,500,783
Purchases		9,470,507			7,385,062
Discount accretion		4,507,908			4,948,951
Net realized investment gains		45,650			-
Payments		(17,288,490	)		(18,346,857	)
Decrease		(3,264,425	)		(6,012,844	)
Other long-term investments, ending	$	58,223,514		$	61,487,939

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

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

Cash and cash equivalents	$	64,344,122	$	33,839,741	$	30,504,381
Accrued investment income		5,746,167		6,214,459		(468,292	)
Recoverable from reinsurers		9,845,838		10,353,674		(507,836	)
Assets held in trust under coinsurance agreement		31,176,310		79,940,459		(48,764,149	)
Agents' balances and due premiums		1,393,277		1,284,003		109,274
Deferred policy acquisition costs		66,640,453		60,795,108		5,845,345
Value of insurance business acquired		3,593,440		3,777,353		(183,913	)
Other assets		10,320,307		19,299,098		(8,978,791	)
Assets other than investment assets	$	193,059,914	$	215,503,895	$	(22,443,981	)

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

The $48,764,149 decrease in assets held in trust under the coinsurance agreement is due to a reduction in assets from the significant surrenders of annuity contracts under TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company that is administered on a funds withheld basis.

The increase in deferred policy acquisition costs for the years ended December 31, 2024 and 2023, respectively, are summarized as follows:

	Years Ended December 31,
	2024			2023
Balance, beginning of year	$	60,795,108		$	56,183,785
Capitalization of commissions, sales and issue expenses		16,620,462			13,476,834
Amortization		(10,775,374	)		(8,863,514	)
Deferred acquisition costs allocated to investments		257			(1,997	)
Balance, end of year	$	66,640,453		$	60,795,108

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

					Amount Change
	December 31, 2024		December 31, 2023		2024 less 2023
Federal and state income taxes recoverable	$	4,708,718	$	10,845,790	$	(6,137,072	)
Advances to mortgage loan originator		4,746,638		4,487,715		258,923
Accrued management fee		393,159		345,148		48,011
Lease asset - right to use		270,679		369,107		(98,428	)
Other receivables, prepaid assets and deposits		171,032		159,854		11,178
Notes receivable		30,081		44,319		(14,238	)
Receivables from lottery vendor		-		278,207		(278,207	)
Guaranty funds		-		723,767		(723,767	)
Advances to an independently owned investment firm		-		2,045,191		(2,045,191	)
Total other assets	$	10,320,307	$	19,299,098	$	(8,978,791	)

There was a $6,137,072 decrease in federal and state income taxes recoverable in 2024 primarily due to receiving a federal income tax refund of $8,087,076 for the tax years 2020, 2021 and 2022 that exceeded federal and state tax withholdings on lottery receivables.

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

There was a $723,767 decrease in the guaranty fund primarily due to a reduction in the premium tax credit. A large portion of the guaranty fund assessment was derived from annuity products, however most states do not assess premium taxes on annuity business.

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

There was a $258,923 increase in advances to one mortgage loan originator who acquires mortgage loans for our life companies.

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

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

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

The $14,298,302 increase in future policy benefits is primarily related to the production of new life insurance policies and the aging of existing policies an additional year.

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

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

The $204,697 decrease in deferred federal income taxes was due to $367,571 of decreased deferred federal income taxes on the unrealized depreciation of fixed maturity securities available-for-sale and $162,874 of operating deferred federal tax expense.

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

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

							Amount Change
	December 31, 2024			December 31, 2023			2024 less 2023
Mortgage loans suspense	$	5,910,871		$	5,841,113		$	69,758
Suspense accounts payable		2,695,069			800,262			1,894,807
Accrued expenses payable		611,000			696,000			(85,000	)
Unclaimed funds		582,040			488,492			93,548
Accounts payable		274,493			53,804			220,689
Lease liability		270,679			369,107			(98,428	)
Unearned investment income		148,233			115,166			33,067
Guaranty fund assessments		86,000			713,000			(627,000	)
Deferred revenue		30,250			41,250			(11,000	)
Payable for securities purchased		6,179			7,082			(903	)
Other payables, withholdings and escrows		(194,751	)		(243,134	)		48,383
Total other liabilities	$	10,420,062		$	8,882,142		$	1,537,920

The $1,894,807 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 $220,689 increase in account payable is primarily amounts owed to a lottery vendor.

The $627,000 decrease in the guaranty fund assessments is primarily due to a reduction in potential assessments in the event insurance entities become insolvent or default on other insurance obligations.

Liquidity and Capital Resources

The Company raised $1,450,000 from two private placements during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012; and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.

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

As of December 31, 2024, we had cash and cash equivalents totaling $64,344,122. As of December 31, 2024, cash and cash equivalents of $35,799,002 and $22,206,273, respectively, totaling $58,005,275 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the OID of any dividend or intercompany transaction to transfer funds to FTFC. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year.

Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is no capacity for TLIC to pay a dividend due to a negative unassigned surplus of $7,079,124 as of December 31, 2024. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $1,067,766 in 2025 without prior approval. FBLIC has paid no dividends to TLIC in 2024 and 2023. TLIC has paid no dividends to FTFC.

The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures interest and non-interest bearing accounts up to $250,000. Uninsured balances aggregate $50,995,135 and $26,017,084 as of December 31, 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.

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

	Years Ended December 31,						Amount Change
	2024			2023			2024 less 2023
Net cash provided by operating activities	$	90,007,676		$	40,390,718		$	49,616,958
Net cash used in investing activities		(34,471,710	)		(4,597,261	)		(29,874,449	)
Net cash used in financing activities		(25,031,585	)		(35,496,441	)		10,464,856
Increase in cash		30,504,381			297,016			30,207,365
Cash and cash equivalents, beginning of period		33,839,741			33,542,725			297,016
Cash and cash equivalents, end of period	$	64,344,122		$	33,839,741		$	30,504,381

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

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

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

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

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

Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)	$	96,319		$	96,319		$	-
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)		1,011			1,011			-
Additional paid-in capital		43,668,023			43,668,023			-
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)		(893,947	)		(893,947	)		-
Accumulated other comprehensive loss		(11,024,079	)		(9,641,308	)		(1,382,771	)
Accumulated earnings		37,202,901			30,786,110			6,416,791
Total shareholders' equity	$	69,050,228		$	64,016,208		$	5,034,020

The increase in shareholders’ equity of $5,034,020 for the year ended December 31, 2024 is primarily due to $6,416,791 in net income and $1,382,771 increase 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 ($13,957,881) and ($12,207,282) as of December 31, 2024 and 2023, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $1,849,782 in unrealized losses arising for year ended December 31, 2024 has been increased by 2024 net realized investment losses of $99,183 originating from the sale, calls and maturities for fixed maturity securities available-for-sale resulting in net unrealized losses on investments of $1,750,599.

A primary liquidity concern is the risk of an extraordinary level of early policyholder withdrawals. We include provisions within our insurance policies, such as surrender charges, that help limit and discourage early withdrawals. Individual life insurance policies are less susceptible to withdrawal than annuity reserves and deposit liabilities because policyholders may incur surrender charges and undergo a new underwriting process in order to obtain a new insurance policy. Cash flow projections and cash flow tests under various market interest rate scenarios are also performed annually to assist in evaluating liquidity needs and adequacy. We currently anticipate that available liquidity sources and future cash flows will be adequate to meet our needs for funds.

One of our significant risks relates to the fluctuations in interest rates. Regarding interest rates, the value of our available-for-sale fixed maturity securities investment portfolio will increase or decrease in an inverse relationship with fluctuations in interest rates, while net investment income earned on newly acquired available-for-sale fixed maturity securities increases or decreases in direct relationship with interest rate changes.

From an income perspective, we are exposed to rising interest rates which could be a significant risk, as TLIC’s and FBLIC’s annuity business is impacted by changes in interest rates. Life insurance company policy liabilities bear fixed rates. From a liquidity perspective, our fixed rate policy liabilities are relatively insensitive to interest rate fluctuations. We believe gradual increases in interest rates do not present a significant liquidity exposure for the life insurance policies and annuity contracts. We maintain conservative durations in our fixed maturity portfolio.

As of December 31, 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 14.5% 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 2024, the SVL also requires the Company to perform annual cash flow testing for TLIC and FBLIC. This testing is designed to ensure that statutory reserve levels will maintain adequate protection in a variety of potential interest rate scenarios. The Actuarial Standards Board of the American Academy of Actuaries also requires cash flow testing as a basis for the actuarial opinion on the adequacy of the reserves which is a required part of the annual statutory reporting process.

Our marketing plan could be modified to emphasize certain product types and reduce others. New business levels could be varied in order to find the optimum level. We believe that our current liquidity, current bond portfolio maturity distribution and cash position give us substantial resources to administer our existing business and fund growth generated by direct sales.

The operations of TLIC and FBLIC may require additional capital contributions to meet statutory capital and surplus requirements mandated by state insurance departments. Life insurance contract liabilities are generally long term in nature and are generally paid from future cash flows or existing assets and reserves. We will service other expenses and commitments by: (1) using available cash, (2) dividends from TLIC and FBLIC that are limited by law to the greater of prior year net operating income or 10% of prior year‑end surplus unless specifically approved by the controlling insurance department, (3) public and private offerings of our common stock and (4) corporate borrowings, if necessary.

Effective January 1, 2019, the Company entered into a revised advance agreement with one loan originator. As of December 31, 2024, the Company has outstanding advances to this loan originator totaling $4,746,638. The advances are secured by $9,542,484 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $1,253,362 to the loan originator that would result in additional security in the form of residential mortgage loans on real estate to be assigned to the Company.

Effective January 1, 2019, the Company also entered into a revised escrow agreement with the same loan originator. According to the revised terms of the escrow agreement, as of December 31, 2024, $754,448 of additional and secured residential mortgage loan balances on real estate are held in escrow by the loan originator. As of December 31, 2024, $738,411 of that escrow amount is available to the Company as additional collateral on $4,746,638 of advances to the loan originator. The remaining December 31, 2024 escrow amount of $16,037 is available to the Company as additional collateral on its investment of $3,207,399 in mortgage loans on real estate.

We are not aware of any commitments or unusual events that could materially affect our capital resources. We are not aware of any current recommendations by any regulatory authority which, if implemented, would have a material adverse effect on our liquidity, capital resources or operations. We believe that our existing cash and cash equivalents as of December 31, 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.

There can be no assurance that future developments will be in accordance with our expectations, or that the effect of future developments on us will be as anticipated. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. These factors include among others:

●

general economic conditions and financial factors, including the performance and fluctuations of fixed income, equity, real estate, credit capital and other financial markets;

●

differences between actual experience regarding mortality, morbidity, persistency, surrenders, investment returns, and our pricing assumptions establishing liabilities and reserves or for other purposes;

●

the effect of increased claims activity from natural or man-made catastrophes, pandemic disease, or other events resulting in catastrophic loss of life;

●

adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities;

●

inherent uncertainties in the determination of investment allowances and impairments and in the determination of the valuation allowance on the deferred income tax asset;

●

investment losses and defaults;

●

competition in our product lines;

●

attraction and retention of qualified employees and agents;

●

ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks;

●

the availability, affordability and adequacy of reinsurance protection;

●

the effects of emerging claim and coverage issues;

●

the cyclical nature of the insurance business;

●

interest rate fluctuations;

●

changes in our experiences related to deferred policy acquisition costs;

●

the ability and willingness of counterparties to our reinsurance arrangements and derivative instruments to pay balances due to us;

●

impact of medical epidemics and viruses;

●

domestic or international military actions;

●

the effects of extensive government regulation of the insurance industry;

●

changes in tax and securities law;

●

changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies;

●

regulatory or legislative changes or developments;

●

the effects of unanticipated events on our disaster recovery and business continuity planning;

●

failures or limitations of our computer, data security and administration systems;

●

risks of employee error or misconduct;

●

the assimilation of life insurance businesses we acquire and the sound management of these businesses; and

●

the availability of capital to expand our business.

It is not our corporate policy to make specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. In addition, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable developments.

Item 8. Financial Statements

FIRST TRINITY FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Financial Statements	Page Numbers

Report of Independent Registered Public Accounting Firm (PCAOB ID 718)	37

Consolidated Statements of Financial Position	39

Consolidated Statements of Operations	40

Consolidated Statements of Comprehensive Income	41

Consolidated Statements of Changes in Shareholders’ Equity	42

Consolidated Statements of Cash Flows	43

Notes to Consolidated Financial Statements	45

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of First Trinity Financial Corporation

Opinion on the Consolidated Financial Statements

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

Basis for Opinion

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

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

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

Critical Audit Matters

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

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

Critical Audit Matter Description

The Company’s products include traditional life insurance contracts and annuities in which certain acquisition costs are capitalized and the expenses are deferred into future periods. Management amortizes the capitalized costs of traditional life insurance products over the premium paying period of the products based on assumptions developed and consistent with assumptions used in determining the products future policy benefit liabilities. Amortization of annuity products and certain limited payment life insurance products are amortized based on actual and expected future gross profits. The unamortized deferred policy acquisition cost asset was $66.6 million as of December 31, 2024.

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

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

How the Critical Audit Matter was Addressed in the Audit

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

●

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

●

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

●

We tested data utilized by management for completeness and accuracy

●

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

Future Policy Benefits – Refer to Note 1

Critical Audit Matter Description

Liabilities for amounts payable under the Company’s life insurance products are recorded as future policy benefits liabilities. Such liabilities are established based on actuarial assumptions at the time policies are issued. Management applies considerable judgment in developing the actuarial assumptions based on expectations of future economic conditions and policyholder behavior. These assumptions are developed at the time the contracts are issued, or in the case of a business combination, at the time the contracts are purchased. If actual experience is adverse in nature when compared to the original assumptions in developing the future policy benefits liability, management may be required to establish premium deficiency reserves. The Company’s future policy benefits liability was $138.0 million as of December 31, 2024.

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

How the Critical Audit Matter was Addressed in the Audit

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

●

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

●

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

●

We obtained original assumption information and subsequent experience studies

●

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

/s/ Kerber, Eck & Braeckel LLP

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

Springfield, Illinois

March 11, 2025

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Financial Position

	December 31, 2024			December 31, 2023
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $227,703,702 and $161,908,230 as of December 31, 2024 and 2023, respectively)	$	213,745,821		$	149,700,948
Equity securities at fair value (cost: $5,301,191 and $287,375 as of December 31, 2024 and 2023, respectively)		5,336,062			419,530
Mortgage loans on real estate		209,364,504			239,831,447
Investment real estate		2,351,549			1,305,403
Policy loans		4,367,534			3,474,116
Short-term investments		-			298,257
Other long-term investments		58,223,514			61,487,939
Total investments		493,388,984			456,517,640
Cash and cash equivalents		64,344,122			33,839,741
Accrued investment income		5,746,167			6,214,459
Recoverable from reinsurers		9,845,838			10,353,674
Assets held in trust under coinsurance agreement
Available-for-sale fixed maturity securities at fair value (amortized cost: $22,559,107 and $56,824,160 as of December 31, 2024 and 2023, respectively)		17,932,297			51,651,259
Mortgage loans on real estate		12,660,117			27,581,881
Receivable for securities		674,405			-
Payable for securities		(783	)		(4,414	)
Cash and cash equivalents (overdraft)		(89,726	)		711,733
Total assets held in trust under coinsurance agreement		31,176,310			79,940,459
Agents' balances and due premiums		1,393,277			1,284,003
Deferred policy acquisition costs		66,640,453			60,795,108
Value of insurance business acquired		3,593,440			3,777,353
Other assets		10,320,307			19,299,098
Total assets	$	686,448,898		$	672,021,535
Liabilities and Shareholders' Equity
Policy liabilities
Policyholders' account balances	$	431,190,092		$	391,247,676
Future policy benefits		138,027,832			123,729,530
Policy claims		2,478,465			2,410,243
Other policy liabilities		226,553			250,294
Total policy liabilities		571,922,942			517,637,743
Funds withheld under coinsurance agreement		31,032,174			77,257,253
Deferred federal income taxes		4,023,492			4,228,189
Other liabilities		10,420,062			8,882,142
Total liabilities		617,398,670			608,005,327
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of December 31, 2024 and 2023, 9,631,920 issued as of December 31, 2024 and 2023, 9,384,340 outstanding as of December 31, 2024 and 2023)		96,319			96,319
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of December 31, 2024 and 2023)		1,011			1,011
Additional paid-in capital		43,668,023			43,668,023
Treasury stock, at cost (247,580 shares as of December 31, 2024 and 2023)		(893,947	)		(893,947	)
Accumulated other comprehensive loss		(11,024,079	)		(9,641,308	)
Accumulated earnings		37,202,901			30,786,110
Total shareholders' equity		69,050,228			64,016,208
Total liabilities and shareholders' equity	$	686,448,898		$	672,021,535

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Operations

	Years Ended December 31,
	2024			2023
Revenues
Premiums	$	41,878,896		$	38,912,934
Net investment income		30,522,580			31,655,321
Net realized investment gains (losses)		264,821			(180,152	)
Loss on impairments		(129,436	)		-
Service fees		3,161,535			4,701,960
Other income		652,793			666,409
Total revenues		76,351,189			75,756,472
Benefits, Claims and Expenses
Benefits and claims
Increase in future policy benefits		14,565,010			14,212,615
Death benefits		13,176,508			14,298,818
Surrenders		2,471,376			2,173,694
Interest credited to policyholders		15,880,681			15,093,685
Dividend, endowment and supplementary life contract benefits		388,723			362,676
Total benefits and claims		46,482,298			46,141,488
Policy acquisition costs deferred		(16,620,462	)		(13,476,834	)
Amortization of deferred policy acquisition costs		10,775,374			8,863,514
Amortization of value of insurance business acquired		183,913			270,752
Commissions		16,030,481			12,803,764
Other underwriting, insurance and acquisition expenses		11,423,294			11,091,340
Total expenses		21,792,600			19,552,536
Total benefits, claims and expenses		68,274,898			65,694,024
Income before total federal income tax expense		8,076,291			10,062,448
Current federal income tax expense		1,496,626			1,778,778
Deferred federal income tax expense		162,874			368,309
Total federal income tax expense		1,659,500			2,147,087
Net income	$	6,416,791		$	7,915,361
Net income per common share
Class A common stock	$	0.6776		$	0.8358
Class B common stock	$	0.5759		$	0.7104

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

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

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

Years Ended December 31, 2024 and 2023

	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
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:
Net income		-		-		-		-			-			7,915,361			7,915,361
Other comprehensive income		-		-		-		-			4,448,335			-			4,448,335
Balance as of December 31, 2023	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(9,641,308	)	$	30,786,110		$	64,016,208
Comprehensive income:
Net income		-		-		-		-			-			6,416,791			6,416,791
Other comprehensive loss		-		-		-		-			(1,382,771	)		-			(1,382,771	)
Balance as of December 31, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(11,024,079	)	$	37,202,901		$	69,050,228

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2024			2023
Operating activities
Net income	$	6,416,791		$	7,915,361
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on investments		(3,900,534	)		(4,825,475	)
Net realized investment (gains) losses		(264,821	)		180,152
Loss on impairments		129,436			-
Amortization of policy acquisition cost		10,775,374			8,863,514
Policy acquisition cost deferred		(16,620,462	)		(13,476,834	)
Amortization of value of insurance business acquired		183,913			270,752
Allowance for mortgage loan losses		(128,137	)		43,654
Provision for deferred federal income tax expense		162,874			368,309
Interest credited to policyholders		15,880,681			15,093,685
Change in assets and liabilities:
Accrued investment income		468,292			(634,284	)
Recoverable from reinsurers		507,836			749,201
Assets held in trust under coinsurance agreement		51,632,390			17,340,012
Agents' balances and due premiums		(109,274	)		(30,926	)
Other assets (excludes change in receivable for securities sold of $12,920 in 2024)		8,991,711			751,093
Future policy benefits		14,298,302			13,717,356
Policy claims		68,222			(130,845	)
Other policy liabilities		(23,741	)		104,077
Other liabilities (excludes change in payable of securities purchased of ($903) and ($383,426) in 2024 and 2023, respectively)		1,538,823			(5,908,084	)
Net cash provided by operating activities		90,007,676			40,390,718

Investing activities
Purchases of fixed maturity securities		(81,180,014	)		(23,059,491	)
Maturities of fixed maturity securities		3,435,000			4,830,000
Sales of fixed maturity securities		11,744,021			457,601
Purchases of equity securities		(5,129,196	)		(130,550	)
Sale of equity securities		5			-
Joint venture distribution		115,371			119,306
Purchases of mortgage loans		(143,991,455	)		(130,956,402	)
Payments on mortgage loans		173,048,603			132,634,814
Purchases of other long-term investments		(9,470,507	)		(7,385,062	)
Collections on other long-term investments		17,288,490			18,346,857
Sales of real estate		276,956			-
Policy loans		(893,418	)		(633,229	)
Short-term investments		298,257			1,562,321
Net change in receivable and payable for securities sold and purchased		(13,823	)		(383,426	)
Net cash used in investing activities		(34,471,710	)		(4,597,261	)

Financing activities
Policyholders' account deposits		141,387,484			69,082,635
Policyholders' account withdrawals		(166,419,069	)		(104,579,076	)
Net cash used in financing activities		(25,031,585	)		(35,496,441	)

Increase in cash and cash equivalents		30,504,381			297,016
Cash and cash equivalents, beginning of period		33,839,741			33,542,725
Cash and cash equivalents, end of period	$	64,344,122		$	33,839,741

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

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

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

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

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

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies

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

Company Capitalization

The Company raised $1,450,000 from two private placement stock offerings during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012 and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Acquisition of Other Companies

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

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

On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $3,644,839, assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.

Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN insurance company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,746,240. Immediately subsequent to this acquisition, the $1,746,240 of net assets and liabilities of K-TENN along with the related life insurance business operations were contributed to TLIC.

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

Basis of Presentation

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

Investments

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

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

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

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

Principles of Consolidation

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

Reclassifications

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Common Stock and Treasury Stock

Class A and Class B common stock are both fully paid, non-assessable and has a par value of $.01 per share. Class B shareholders are entitled to elect a majority of FTFC’s Board of Directors (one-half plus one) but will only receive, compared to FTFC’s Class A shareholders, 85% of cash dividends, stock dividends or amounts due upon any FTFC merger, sale or liquidation event. FTFC’s Class B shareholders may also convert one share of FTFC’s Class B common stock for a .85 share of FTFC’s Class A common stock. FTFC’s Class A shareholders will elect the remaining Board of Directors members and will receive 100% of cash dividends, stock dividends or amounts due upon any Company merger, sale or liquidation event.

Treasury stock, representing shares of the Company’s common stock that have been reacquired after having been issued and fully paid, is recorded at the reacquisition cost and the shares are no longer outstanding.

Cash and Cash Equivalents

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

Short-term investments

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

Investment Income and Realized Gains and Losses on Sales of Investments

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

Deferred Policy Acquisition Costs

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

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

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

Property and Equipment

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

Reinsurance

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

Funds Withheld Coinsurance

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

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

The Company’s Consolidated Statement of Cash Flows only includes the cash flow activities related to the assets and funds withheld under the coinsurance agreement in a one-line presentation and does not include those cash flow activities in the other financial captions and categories presented in that financial statement.

Value of Insurance Business Acquired

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

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

As of December 31, 2024 and 2023, there was $5,146,438 and $4,962,525, respectively, of accumulated amortization of the value of insurance business acquired due to the purchases of FLAC and FBLIC. The Company expects to amortize the value of insurance business acquired by the following amounts over the next five years:, $156,102 in 2025, $142,645 in 2026, $149,467 in 2027, $144,043 in 2028 and $148,414 in 2029.

Other Assets and Other Liabilities

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

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

Policyholders’ Account Balances

The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the financial statement date. This liability is generally equal to the accumulated account deposits plus interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Interest crediting rates for individual annuities range from 2.25% to 5.75%. Interest crediting rates for deposit-type liabilities range from 2.50% to 4.00%.

Future Policy Benefits

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

Policy Claims

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

Federal Income Taxes

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Accumulated Other Comprehensive Income (Loss)

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

Revenues and Expenses

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

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

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

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

Net Income Per Common Share Basic

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

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

Cybersecurity

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

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

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Computer hardware and software,

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Security access, logging and user termination,

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

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Encryption,

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System change control,

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Data back up and remote sites,

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Data recovery,

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and Disaster recovery

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

Subsequent Events

Management has evaluated all events subsequent to December 31, 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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Troubled Debt Restructurings and Vintage Disclosures

Improvements to Reportable Segment Disclosures

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Recent Accounting Pronouncements

Targeted Improvements to the Accounting for Long-Duration Contracts

Transition for Sold Contracts

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

1. Organization and Significant Accounting Policies (continued)

Improvements to Income Tax Disclosures

Expense Disaggregation Disclosures

Debt With Conversion and Other Options

First Trinity Financial CORP 10-K