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United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2025

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

For the transition period From ______________ to ______________.

Commission file number: 000-52613

FIRST TRINITY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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

7633 East 63rd Place, Suite 230

Tulsa, Oklahoma 74133-1246

(Address of principal executive offices)

(918) 249-2438

(Registrant's telephone number, including area code)

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

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

Yes ☑ No ☐

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

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

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

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

Yes ☐ No ☑

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 11, 2025, the registrant had 9,384,340 shares of Class A common stock, .01 par value, outstanding and 101,102 shares of Class B common stock, .01 par value, outstanding.

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

FIRST TRINITY FINANCIAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTERLY PERIOD ENDED JUNE 30, 2025

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page Number

Item 1. Consolidated Financial Statements

Consolidated Statements of Financial Position as of June 30, 2025 (Unaudited) and December 31, 2024	3

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)	4

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)	5

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)	6

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 4. Controls and Procedures	70

Part II. OTHER INFORMATION

Item 1. Legal Proceedings	71

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	71

Item 3. Defaults upon Senior Securities	71

Item 4. Mine Safety Disclosures	71

Item 5. Other Information	71

Item 6. Exhibits	72

Signatures	73

Exhibit No. 31.1

Exhibit No. 31.2

Exhibit No. 32.1

Exhibit No. 32.2

Exhibit No. 101.INS

Exhibit No. 101.SCH

Exhibit No. 101.CAL

Exhibit No. 101.DEF

Exhibit No. 101.LAB

Exhibit No. 101.PRE

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Financial Position

	(Unaudited)
	June 30, 2025			December 31, 2024
Assets
Investments
Available-for-sale fixed maturity securities at fair value (amortized cost: $222,527,562 and $227,703,702 as of June 30, 2025 and December 31, 2024, respectively)	$	213,049,532		$	213,745,821
Equity securities at fair value (cost: $5,449,372 and $5,301,191 as of June 30, 2025 and December 31, 2024, respectively)		5,517,371			5,336,062
Mortgage loans on real estate		249,291,677			209,364,504
Investment real estate		2,545,159			2,351,549
Policy loans		4,708,650			4,367,534
Other long-term investments		54,583,080			58,223,514
Total investments		529,695,469			493,388,984
Cash and cash equivalents		37,602,752			64,344,122
Accrued investment income		6,766,776			5,746,167
Recoverable from reinsurers		9,679,675			9,845,838
Assets held in trust under coinsurance agreement
Available-for-sale fixed maturity securities at fair value (amortized cost: $19,882,007 and $22,559,107 as of June 30, 2025 and December 31, 2024, respectively)		15,478,829			17,932,297
Mortgage loans on real estate		10,471,682			12,660,117
Receivable for securities		-			674,405
Payable for securities		(2,096	)		(783	)
Cash and cash equivalents		679,920			(89,726	)
Total assets held in trust under coinsurance agreement		26,628,335			31,176,310
Agents' balances and due premiums		1,354,254			1,393,277
Deferred policy acquisition costs		67,552,685			66,640,453
Value of insurance business acquired		3,501,657			3,593,440
Other assets		11,403,722			10,320,307
Total assets	$	694,185,325		$	686,448,898

Liabilities and Shareholders' Equity
Policy liabilities
Policyholders' account balances	$	432,133,688		$	431,190,092
Future policy benefits		144,970,399			138,027,832
Policy claims		2,653,269			2,478,465
Other policy liabilities		321,734			226,553
Total policy liabilities		580,079,090			571,922,942
Funds withheld under coinsurance agreement		26,319,584			31,032,174
Deferred federal income taxes		4,828,761			4,023,492
Other liabilities		7,347,178			10,420,062
Total liabilities		618,574,613			617,398,670
Shareholders' equity
Class A common stock, par value $.01 per share (40,000,000 shares authorized as of June 30, 2025 and December 31, 2024, 9,631,920 issued as of June 30, 2025 and December 31, 2024, 9,384,340 outstanding as of June 30, 2025 and December 31, 2024)		96,319			96,319
Class B common stock, par value $.01 per share (10,000,000 shares authorized, 101,102 issued and outstanding as of June 30, 2025 and December 31, 2024)		1,011			1,011
Additional paid-in capital		43,668,023			43,668,023
Treasury stock, at cost (247,580 shares as of June 30, 2025 and December 31, 2024)		(893,947	)		(893,947	)
Accumulated other comprehensive loss		(7,527,146	)		(11,024,079	)
Accumulated earnings		40,266,452			37,202,901
Total shareholders' equity		75,610,712			69,050,228
Total liabilities and shareholders' equity	$	694,185,325		$	686,448,898

See notes to consolidated financial statements.

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Revenues
Premiums	$	10,985,721		$	10,302,404		$	21,144,797		$	19,953,409
Net investment income		9,111,238			7,668,417			16,929,521			15,626,294
Net realized investment gains (losses)		(22,958	)		(159,965	)		839,246			(119,904	)
Loss on impairments		-			(129,436	)		-			(129,436	)
Service fees		2,304,439			498,484			3,056,354			746,166
Other income		3,212			(36,774	)		21,429			608,809
Total revenues		22,381,652			18,143,130			41,991,347			36,685,338

Benefits, Claims and Expenses
Benefits and claims
Increase in future policy benefits		3,646,797			3,835,769			7,143,671			6,416,784
Death benefits		3,878,238			3,370,887			7,843,231			6,881,640
Surrenders		750,541			581,841			1,526,108			1,159,198
Interest credited to policyholders		4,818,377			3,600,321			9,589,981			7,267,805
Dividend, endowment and supplementary life contract benefits		101,740			95,642			230,527			180,658
Total benefits and claims		13,195,693			11,484,460			26,333,518			21,906,085
Policy acquisition costs deferred		(3,233,202	)		(4,341,346	)		(6,106,464	)		(7,266,639	)
Amortization of deferred policy acquisition costs		2,764,431			2,671,126			5,193,070			4,996,837
Amortization of value of insurance business acquired		45,147			43,839			91,783			95,176
Commissions		3,177,497			4,030,610			5,877,340			6,812,337
Other underwriting, insurance and acquisition expenses		3,205,866			2,466,099			6,647,945			6,075,598
Total expenses		5,959,739			4,870,328			11,703,674			10,713,309
Total benefits, claims and expenses		19,155,432			16,354,788			38,037,192			32,619,394
Income before total federal income tax expense (benefit)		3,226,220			1,788,342			3,954,155			4,065,944
Current federal income tax expense		799,314			263,435			1,014,899			397,007
Deferred federal income tax expense (benefit)		(68,531	)		134,927			(124,295	)		484,804
Total federal income tax expense		730,783			398,362			890,604			881,811
Net income	$	2,495,437		$	1,389,980		$	3,063,551		$	3,184,133
Net income per common share
Class A common stock	$	0.2635		$	0.1468		$	0.3235		$	0.3362
Class B common stock	$	0.2240		$	0.1248		$	0.2750		$	0.2858

See notes to consolidated financial statements (unaudited).

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025		2024
Net income	$	2,495,437		$	1,389,980		$	3,063,551	$	3,184,133
Other comprehensive income (loss)
Total net unrealized investment gains (losses) arising during the period		505,990			(895,539	)		4,580,448		(1,593,362	)
Less net realized investment gains (losses) having no credit losses		(73,291	)		(42,415	)		152,789		(44,113	)
Net unrealized investment gains (losses)		579,281			(853,124	)		4,427,659		(1,549,249	)
Less adjustment to deferred acquisition costs		185			(191	)		1,162		(94	)
Other comprehensive income (loss) before federal income tax expense (benefit)		579,096			(852,933	)		4,426,497		(1,549,155	)
Federal income tax expense (benefit)		121,611			(179,116	)		929,564		(325,322	)
Total other comprehensive income (loss)		457,485			(673,817	)		3,496,933		(1,223,833	)
Total comprehensive income	$	2,952,922		$	716,163		$	6,560,484	$	1,960,300

See notes to consolidated financial statements (unaudited).

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

Three and Six Months Ended June 30, 2025 and 2024

(Unaudited)

	Class A		Class B							Accumulated
	Common		Common		Additional					Other					Total
	Stock		Stock		Paid-in		Treasury			Comprehensive			Accumulated		Shareholders'
	$.01 Par Value		$.01 Par Value		Capital		Stock			Loss			Earnings		Equity
Three months ended June 30, 2024
Balance as of April 1, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(10,191,324	)	$	32,580,263	$	65,260,345
Comprehensive income (loss):
Net income		-		-		-		-			-			1,389,980		1,389,980
Other comprehensive loss		-		-		-		-			(673,817	)		-		(673,817	)
Balance as of June 30, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(10,865,141	)	$	33,970,243	$	65,976,508

Six months ended June 30, 2024
Balance as of January 1, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(9,641,308	)	$	30,786,110	$	64,016,208
Comprehensive income (loss):
Net income		-		-		-		-			-			3,184,133		3,184,133
Other comprehensive loss		-		-		-		-			(1,223,833	)		-		(1,223,833	)
Balance as of June 30, 2024	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(10,865,141	)	$	33,970,243	$	65,976,508

Three months ended June 30, 2025
Balance as of April 1, 2025	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(7,984,631	)	$	37,771,015	$	72,657,790
Comprehensive income:
Net income		-		-		-		-			-			2,495,437		2,495,437
Other comprehensive income		-		-		-		-			457,485			-		457,485
Balance as of June 30, 2025	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(7,527,146	)	$	40,266,452	$	75,610,712

Six months ended June 30, 2025
Balance as of January 1, 2025	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(11,024,079	)	$	37,202,901	$	69,050,228
Comprehensive income:
Net income		-		-		-		-			-			3,063,551		3,063,551
Other comprehensive income		-		-		-		-			3,496,933			-		3,496,933
Balance as of June 30, 2025	$	96,319	$	1,011	$	43,668,023	$	(893,947	)	$	(7,527,146	)	$	40,266,452	$	75,610,712

See notes to consolidated financial statements (unaudited).

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2025			2024
Operating activities
Net income	$	3,063,551		$	3,184,133
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on investments		(1,400,000	)		(2,346,688	)
Net realized investment (gains) losses		(839,246	)		119,904
Loss on impairments		-			129,436
Amortization of policy acquisition cost		5,193,070			4,996,837
Policy acquisition cost deferred		(6,106,464	)		(7,266,639	)
Amortization of value of insurance business acquired		91,783			95,176
Allowance for mortgage loan losses		204,909			(158,346	)
Provision for deferred federal income tax expense		(124,295	)		484,804
Interest credited to policyholders		9,589,981			7,267,805
Change in assets and liabilities:
Accrued investment income		(1,020,609	)		615,087
Recoverable from reinsurers		166,163			268,085
Assets held in trust under coinsurance agreement		5,585,504			39,968,624
Agents' balances and due premiums		39,023			(171,186	)
Other assets (excludes change in receivable for securities sold of $8,561 in 2025)		(1,091,976	)		8,629,803
Future policy benefits		6,942,567			6,253,021
Policy claims		174,804			56,948
Other policy liabilities		95,181			57,394
Other liabilities (excludes change in payable for securities purchased of $10,088 and $538,068 in 2025 and 2024, respectively)		(3,082,972	)		8,680,602
Net cash provided by operating activities		17,480,974			70,864,800

Investing activities
Purchases of fixed maturity securities		(50,575,278	)		(7,196,831	)
Maturities of fixed maturity securities		250,000			1,400,000
Sales of fixed maturity securities		55,446,776			2,051,501
Purchases of equity securities		(215,855	)		(45,542	)
Proceeds from realized capital gains, equity securities		6,944			-
Joint venture distributions		67,674			53,409
Purchases of mortgage loans		(99,467,865	)		(37,309,014	)
Payments on mortgage loans		58,809,803			72,861,854
Purchases of other long-term investments		(1,823,500	)		(4,932,676	)
Payments on other long-term investments		7,702,946			7,902,326
Sale of real estate		294,982			-
Net change in policy loans		(341,116	)		(268,166	)
Net change in short-term investments		-			298,257
Net change in receivable and payable for securities sold and purchased		18,649			538,068
Net cash provided by (used in) investing activities		(29,825,840	)		35,353,186

Financing activities
Policyholders' account deposits		18,392,643			47,417,280
Policyholders' account withdrawals		(32,789,147	)		(125,662,977	)
Net cash used in financing activities		(14,396,504	)		(78,245,697	)

Increase (decrease) in cash and cash equivalents		(26,741,370	)		27,972,289
Cash and cash equivalents, beginning of period		64,344,122			33,839,741
Cash and cash equivalents, end of period	$	37,602,752		$	61,812,030

See notes to consolidated financial statements (unaudited).

First Trinity Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

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

(Unaudited)

During the six months ended June 30, 2025 and 2024, the Company foreclosed on residential mortgage loans of real estate totaling $459,180 and $563,081 and transferred that property to investment real estate that is now held for sale.

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

	Six Months Ended			Six Months Ended
	June 30, 2025			June 30, 2024
Reductions in mortgage loans due to foreclosure	$	459,180		$	563,081
Investment real estate held-for-sale acquired through foreclosure		(459,180	)		(563,081	)
Net cash used in investing activities	$	-		$	-

See notes to consolidated financial statements (unaudited).

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies

Nature of Operations

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

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

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

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

Company Capitalization

The Company raised $1,450,000 from two private placement stock offerings during 2004 and $25,669,480 from two public stock offerings and one private placement stock offering from June 22, 2005 through February 23, 2007; June 29, 2010 through April 30, 2012 and August 15, 2012 through March 8, 2013. The Company issued 7,347,488 shares of its common stock and incurred $3,624,518 of offering costs during these private placements and public stock offerings. On January 1, 2020, the Company issued 168,866 shares in connection with its acquisition of K-TENN Insurance Company (“K-TENN”).

The Company also issued 702,685 shares of its common stock in connection with two stock dividends paid to shareholders in 2011 and 2012 that resulted in accumulated earnings being charged $5,270,138 with an offsetting credit of $5,270,138 to common stock and additional paid-in capital. In 2020, the Company paid a $0.05 per share cash dividend for a total of $393,178 and issued 791,339 shares of Class A common stock in connection with a 10% stock dividend to its Class A shareholders. The 10% stock dividend resulted in accumulated earnings being charged $8,657,249 with an offsetting credit of $8,657,249 to common stock and additional paid-in capital.

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

Acquisition of Other Companies

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

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

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

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

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

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

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

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

Basis of Presentation

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

The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the year ended December 31, 2025 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to consolidated financial statements prepared in accordance with U.S. GAAP, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's report on Form 10-K for the year ended December 31, 2024.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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

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

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

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

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

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

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

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

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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

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

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

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

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

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

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

Principles of Consolidation

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

Reclassifications

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

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

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.

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.

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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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

●

Computer hardware and software,

●

Security access, logging and user termination,

●

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

●

Encryption,

●

System change control,

●

Data back up and remote sites,

●

Data recovery,

●

And Disaster recovery

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

Subsequent Events

Management has evaluated all events subsequent to June 30, 2025 through the date that these financial statements have been issued.

Adopted Accounting Standards

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 for interim periods beginning in 2025.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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 was permitted. The Company, however, will adopt this pronouncement for its annual reporting as of and for the year ended December 31, 2025.

With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, the Company will apply the amendments (including market risks benefits) retrospectively as of the beginning of the earliest period presented that will be January 1, 2024. 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 was not elected by the Company. The Company will adopt this pronouncement for its annual reporting as of and for the year ended December 31, 2025, with the amendments applied retrospectively as of January 1, 2024. 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.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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 will adopt and disclose 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.

In January 2025, the FASB issued Accounting Standards Update 2025-01 that amended Accounting Standards Update 2024-03 to clarify the effective date of the original pronouncement regarding Expense Disaggregation Disclosures. The FASB’s intent in Accounting Standards Update 2024-03 was that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The FASB acknowledges, however, that there was ambiguity that only potentially affected non-calendar year-end entities when Accounting Standards Update 2024-03 was issued.

The amendment in this pronouncement amends the effective date of Accounting Standards Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Accounting Standards Update 2024-03 is permitted. This amendment does not impact the Company.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

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.

Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity

In May 2025, the FASB issued amendments (Accounting Standards Update 2025-03) to revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a Variable Interest Entity (“VIE” defined as a legal structure in which controlling interest is determined by something other than majority voting rights and controlling interest is arranged via a contractual relationship rather than through direct ownership) that meets the definition of a business. This amendment requires that the following factors be considered when a VIE is involved to determine which entity is the accounting acquirer:

a. If the business combination is effected primarily by transferring cash or other assets or incurring liabilities, the acquirer is usually the entity that transfers the cash or other assets or incurs the liabilities.

b. Other than a reverse acquisition, if the business combination is effected primarily by exchanging equity interests, the acquirer is usually the entity that issues its equity interests.

c. The acquirer is usually the entity that receives the largest portion of the voting rights of the combined entity.

d. If no owner has a majority voting interest, the acquirer is usually the individual or group that owns the largest minority interest of the combined entity.

e. The acquirer is usually the individual or group that has the ability to elect, appoint or remove members of the combined entity.

f. The acquirer is usually the individual or group that dominates management of the combined entity.

g. The acquirer is usually the individual or group that pays a premium over the precombination fair value of the other combined entity or entities.

h. The acquirer is usually the individual or group whose relative size in terms of assets, revenues, earnings or some other measure is significantly larger than the other combining entity or entities.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

1. Organization and Significant Accounting Policies (continued)

i. In a business combination involving more than two entities, the acquirer is usually the entity that initiated the combination and is significantly larger than the other combining entity or entities.

The amendments in this guidance are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued (or made available for issuance). If an entity adopts these amendments in an interim reporting period, it shall adopt as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period.

An entity shall apply this guidance on a prospective basis to all business combinations that have an acquisition date that occurs on or after the date of initial application. An entity shall disclose in both the interim reporting period (if applicable) and the annual reporting period of the change the nature of and reason for the change in accounting principle.

This guidance does not currently impact the Company’s consolidation of its subsidiaries but Update 2025-03 will be followed in any future business combination situations.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments

Investments in fixed maturity available-for-sale securities as of June 30, 2025 and December 31, 2024 are summarized as follows:

			Gross		Gross
	Amortized Cost		Unrealized		Unrealized		Fair
	or Cost		Gains		Losses		Value
	June 30, 2025 (Unaudited)
Fixed maturity securities
U.S. government and U.S. government agencies	$	4,266,801	$	7,871	$	42	$	4,274,630
States and political subdivisions		7,529,064		35,624		285,317		7,279,371
U.S. government agency mortgage backed securities		32,574,218		108,432		375,575		32,307,075
Commercial mortgage-backed securities		23,860,092		153,881		1,079,297		22,934,676
Residential mortgage-backed securities		9,333		4,940		-		14,273
Corporate bonds		109,442,502		378,778		6,078,777		103,742,503
Asset-backed securities		13,549,907		60,421		635,478		12,974,850
Exchange traded securities		500,000		-		14,400		485,600
Foreign bonds		29,545,645		39,197		1,550,288		28,034,554
Redeemable preferred securities		1,250,000		-		248,000		1,002,000
Total fixed maturity securities	$	222,527,562	$	789,144	$	10,267,174	$	213,049,532

Fixed maturity securities held in trust under coinsurance agreement	$	19,882,007	$	474	$	4,403,652	$	15,478,829

	December 31, 2024
Fixed maturity securities
U.S. government and U.S. government agencies	$	4,263,791	$	12,654	$	480	$	4,275,965
States and political subdivisions		8,156,851		173		463,791		7,693,233
U.S. government agency mortgage backed securities		41,085,693		20,347		870,659		40,235,381
Commercial mortgage-backed securities		19,999,386		5,070		1,505,058		18,499,398
Residential mortgage-backed securities		9,750		4,361		-		14,111
Corporate bonds		106,678,530		28,519		7,350,495		99,356,554
Asset-backed securities		15,628,104		67,390		796,910		14,898,584
Exchange traded securities		1,184,560		-		687,760		496,800
Foreign bonds		29,447,037		5,683		2,212,925		27,239,795
Redeemable preferred securities		1,250,000		-		214,000		1,036,000
Total fixed maturity securities	$	227,703,702	$	144,197	$	14,102,078	$	213,745,821

Fixed maturity securities held in trust under coinsurance agreement	$	22,559,107	$	21,034	$	4,647,844	$	17,932,297

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

All securities in an unrealized loss position as of the financial statement dates, the estimated fair value, pre-tax gross unrealized loss and number of securities by length of time that those securities have been continuously in an unrealized loss position as of June 30, 2025 and December 31, 2024 are summarized as follows:

			Unrealized		Number of
	Fair Value		Loss		Securities
	June 30, 2025 (Unaudited)
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies	$	244,508	$	42		1
States and political subdivisions		1,375,679		38,088		4
U.S. government agency mortgage backed securities		20,696,513		375,575		31
Commercial mortgage-backed securities		2,292,140		15,958		3
Corporate bonds		17,487,623		350,262		46
Asset-backed securities		1,546,714		9,577		4
Foreign bonds		3,253,891		73,777		7
Total less than 12 months in an unrealized loss position		46,897,068		863,279		96
More than 12 months in an unrealized loss position
States and political subdivisions		2,527,445		247,229		15
Commercial mortgage-backed securities		7,692,121		1,063,339		20
Corporate bonds		57,878,650		5,728,515		167
Asset-backed securities		7,065,093		625,901		20
Exchange traded securities		485,600		14,400		2
Foreign bonds		21,455,483		1,476,511		56
Redeemable preferred securities		1,002,000		248,000		4
Total more than 12 months in an unrealized loss position		98,106,392		9,403,895		284
Total fixed maturity securities in an unrealized loss position	$	145,003,460	$	10,267,174		380

Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position	$	797,080	$	2,920		1
Total more than 12 months in an unrealized loss position		13,941,640		4,400,732		61
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	14,738,720	$	4,403,652		62

	December 31, 2024
Fixed maturity securities
Less than 12 months in an unrealized loss position
U.S. government and U.S. government agencies	$	810,291	$	480	4
States and political subdivisions		4,350,258		95,994	12
U.S. government agency mortgage backed securities		35,821,510		870,659	52
Commercial mortgage-backed securities		9,319,025		91,842	15
Corporate bonds		33,196,771		810,633	84
Asset-backed securities		1,811,793		29,633	6
Foreign bonds		5,707,531		185,096	11
Total less than 12 months in an unrealized loss position		91,017,179		2,084,337	184
More than 12 months in an unrealized loss position
States and political subdivisions		3,102,931		367,797	18
Commercial mortgage-backed securities		7,541,167		1,413,216	21
Corporate bonds		61,587,904		6,539,862	182
Asset-backed securities		7,391,463		767,277	21
Exchange traded securities		496,800		687,760	2
Foreign bonds		20,747,051		2,027,829	55
Redeemable preferred securities		1,036,000		214,000	4
Total more than 12 months in an unrealized loss position		101,903,316		12,017,741	303
Total fixed maturity securities in an unrealized loss position	$	192,920,495	$	14,102,078	487

Fixed maturity securities held in trust under coinsurance agreement
Total less than 12 months in an unrealized loss position	$	110,506	$	616	1
Total more than 12 months in an unrealized loss position		15,142,397		4,647,228	67
Total fixed maturity securities held in trust under coinsurance agreement in a unrealized loss position	$	15,252,903	$	4,647,844	68

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

As of June 30, 2025, the Company held 380 available-for-sale fixed maturity securities with an unrealized loss of $10,267,174, fair value of $145,003,460 and amortized cost of $155,270,634. These unrealized losses were primarily due to the market interest rate movements in the bond market as of June 30, 2025. The ratio of the fair value to the amortized cost of these 380 securities is 93%.

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

The change in the current estimate of credit losses on fixed maturity available-for-sale securities for the six months ended June 30, 2025 and December 31, 2024, are summarized as follows:

	(Unaudited)
	June 30, 2025			December 31, 2024

Beginning balance	$	(725,960	)	$	(430,470	)
Current estimate of credit losses		618,110			(295,490	)
Ending balance	$	(107,850	)	$	(725,960	)

Net unrealized losses included in other comprehensive income (loss) for investments classified as available-for-sale, net of the effect of deferred income taxes and deferred acquisition costs assuming that the depreciation had been realized as of June 30, 2025 and December 31, 2024, are summarized as follows:

	(Unaudited)
	June 30, 2025			December 31, 2024
Unrealized depreciation
Available-for-sale fixed maturity securities	$	(9,478,030	)	$	(13,957,881	)
Other long-term investments		(52,192	)		-
Adjustment to deferred acquisition costs		2,189			3,351
Deferred income taxes		2,000,887			2,930,451
Net unrealized depreciation on available-for-sale securities	$	(7,527,146	)	$	(11,024,079	)

Assets held in trust under coinsurance agreement
Unrealized depreciation on fixed maturity securities available-for-sale	$	(4,403,178	)	$	(4,626,810	)

The Company’s other long-term investments as of June 30, 2025 and December 31, 2024 are summarized as follows:

	(Unaudited)
	June 30, 2025		December 31, 2024
Lotteries	$	53,926,506	$	57,462,681
Co-op loans		552,676		760,833
Comercial mortgage-backed securities		103,898		-

Total long-term investments	$	54,583,080	$	58,223,514

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

The Company’s other long-term investments in lottery prize cash flows were $53,926,506 and $57,462,681 as of June 30, 2025 and December 31, 2024, respectively. The lottery prize cash flows are assignments of the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries.

The Company’s other long-term investments in co-op loans were $552,676 and $760,833 as of June 30, 2025 and December 31, 2024, respectively. A co-op ownership is represented by shares of stock in a corporation that owns the real estate. Co-op loans use the shares of stock and not the real estate to secure the debt.

The Company’s amortized cost and fair value of other long-term investments in commercial mortgage-backed securities that lack substantive credit enhancement were $156,090 and $103,898, respectively, as of June 30, 2025.

The amortized cost and fair value of fixed maturity available-for-sale securities and other long-term investments as of June 30, 2025, by contractual maturity, are summarized as follows:

	June 30, 2025 (Unaudited)
	Fixed Maturity Available-For-Sale Securities				Lottery Prize Cash Flows
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	9,363,801	$	9,329,447	$	13,129,381	$	13,265,892
Due after one year through five years		34,733,073		34,121,820		26,006,691		27,488,541
Due after five years through ten years		47,687,305		45,857,991		9,952,452		11,509,564
Due after ten years		105,467,868		99,685,428		4,837,982		6,280,144
Due at multiple maturity dates		25,275,515		24,054,846		-		-

	$	222,527,562	$	213,049,532	$	53,926,506	$	58,544,141

The amortized cost and fair value of fixed maturity available-for-sale securities held in trust under coinsurance agreement as of June 30, 2025, by contractual maturity, are summarized as follows:

	June 30, 2025 (Unaudited)
	Fixed Maturity Available-For-Sale Securities
	Amortized Cost		Fair Value
Due in one year or less	$	259,629	$	259,715
Due after one year through five years		930,281		897,878
Due after five years through ten years		2,054,198		2,005,860
Due after ten years		13,862,355		9,793,837
Due at multiple maturity dates		2,775,544		2,521,539

	$	19,882,007	$	15,478,829

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, mortgage loans on real estate, investment real estate and equity securities for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

	Three Months Ended June 30, (Unaudited)
	Fixed Maturity Securities						Mortgage Loans on Real Estate						Investment Real Estate					Equity Securities
	2025			2024			2025			2024			2025		2024			2025		2024
Proceeds	$	23,889,372		$	2,418,152		$	38,122,063		$	36,322,107		$	-	$	-		$	4,222	$	-
Gross realized gains		-			24,791			-			-			-		-			4,222		-
Gross realized losses		(73,291	)		(67,206	)		(1,137	)		(34,442	)		-		-			-		-
Loss on impairments		-			-			-			-			-		(129,436	)		-		-

	Six Months Ended June 30, (Unaudited)
	Fixed Maturity Securities						Mortgage Loans on Real Estate						Investment Real Estate					Equity Securities
	2025			2024			2025			2024			2025		2024			2025		2024
Proceeds	$	55,696,776		$	3,451,501		$	58,809,803		$	72,861,854		$	294,982	$	-		$	6,944	$	-
Gross realized gains		221,430			25,165			-			59,858			29,412		-			6,944		-
Gross realized losses		(68,641	)		(69,278	)		(1,137	)		(34,442	)		-		-			-		-
Loss on impairments		-			-			-			-			-		(129,436	)		-		-

The accumulated change in unrealized investment gains (losses) for fixed maturity available-for-sale securities and other long-term investments for the three and six months ended June 30, 2025 and 2024 and the amount of net realized investment gains (losses) on fixed maturity securities available-for-sale, mortgage loans on real estate, investment real estate and equity securities for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

	Three Months Ended June 30, (Unaudited)						Six Months Ended June 30, (Unaudited)
	2025			2024			2025			2024
Change in unrealized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities	$	631,473		$	(853,124	)	$	4,479,851		$	(1,549,249	)
Fixed maturity securities held in trust under coinsurance agreement		37,699			124,551			223,632			84,295
Other long-term investments		(52,192	)		-			(52,192	)		-

Net realized investment gains (losses):
Available-for-sale securities:
Fixed maturity securities		(73,291	)		(42,415	)		152,789			(44,113	)
Fixed maturity securities credit losses		(13,056	)		(79,477	)		618,110			(136,572	)
Mortgage loans on real estate		(1,137	)		(34,442	)		(1,137	)		25,416
Investment real estate		-			-			29,412			-
Equity securities		4,222			-			6,944			-
Equity securities, changes in fair value		60,304			(3,631	)		33,128			35,365

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

Major categories of net investment income for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

	Three Months Ended June 30, (Unaudited)						Six Months Ended June 30, (Unaudited)
	2025			2024			2025			2024
Fixed maturity securities	$	2,530,774		$	1,908,083		$	4,670,728		$	3,670,108
Equity securities		86,081			38,118			163,027			52,752
Other long-term investments		1,069,651			1,124,968			2,191,549			2,292,211
Mortgage loans		5,612,876			4,490,460			10,456,826			9,437,977
Policy loans		88,103			66,039			171,410			134,790
Short-term and other investments		410,977			662,925			741,125			1,135,364
Gross investment income		9,798,462			8,290,593			18,394,665			16,723,202
Investment expenses		(687,224	)		(622,176	)		(1,465,144	)		(1,096,908	)
Net investment income	$	9,111,238		$	7,668,417		$	16,929,521		$	15,626,294

TLIC and FBLIC are required to hold assets on deposit with various state insurance departments for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of June 30, 2025 and December 31, 2024, these required deposits, included in investment assets, had amortized costs that totaled $5,065,649 and $6,740,988, respectively. As of June 30, 2025 and December 31, 2024, these required deposits had fair values that totaled $5,060,118 and $6,735,209, respectively.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

The Company’s mortgage loans by property type as of June 30, 2025 and December 31, 2024 are summarized as follows:

	(Unaudited)
	June 30, 2025		December 31, 2024
Residential mortgage loans	$	231,327,847	$	195,050,397

Commercial mortgage loans by property type
Agricultural		243,030		244,253
Apartment		5,173,343		4,634,586
Industrial		336,537		357,193
Office building		4,728,825		4,120,057
Retail		7,482,095		4,958,018

Total commercial mortgage loans by property type		17,963,830		14,314,107

Total mortgage loans	$	249,291,677	$	209,364,504

Mortgage loans held in trust under coinsurance agreement
Commercial mortgage loans	$	10,471,682	$	12,660,117

Total mortgage loans held in trust under coinsurance agreement	$	10,471,682	$	12,660,117

There were 33 mortgage loans with a remaining principal balance of $7,935,123 that were more than 90 days past due as of June 30, 2025. There were 27 mortgage loans with a remaining principal balance of $7,375,244 that were more than 90 days past due as of June 30, 2024.

There were 10 mortgage loans in default and in the foreclosure process with a remaining principal balance of $2,304,822 as of June 30, 2025. There were 11 mortgage loans in default and in the foreclosure process with a remaining principal balance of $4,130,357 as of June 30, 2024.

The Company’s investment real estate as of June 30, 2025 and December 31, 2024 is summarized as follows:

	(Unaudited)
	June 30, 2025		December 31, 2024
Land - held for investment	$	411,000	$	411,000

Residential real estate - held for sale		2,134,159		1,940,549
Total investment in real estate	$	2,545,159	$	2,351,549

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 2025, the Company foreclosed on residential mortgage loans of real estate totaling $459,180 and transferred those properties to investment real estate held for sale.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

2. Investments (continued)

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 2025, the Company sold investment real estate property with an aggregate carrying value of $265,570. The Company recorded a gross realized investment gain on sale of $29,412 based on an aggregate sales price of $294,982. 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.

3. Fair Value Measurements

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

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

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

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

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

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs, or their ability to be observed, may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in and out of the Level 3 category as of the beginning of the period in which the reclassifications occur.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

3. Fair Value Measurements (continued)

The Company’s fair value hierarchy for those financial instruments measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 is summarized as follows:

	Level 1		Level 2		Level 3		Total
	June 30, 2025 (Unaudited)
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	4,274,630	$	-	$	4,274,630
States and political subdivisions		-		7,279,371		-		7,279,371
U.S. government agency mortgage backed securities		-		32,307,075		-		32,307,075
Commercial mortgage-backed securities		-		22,934,676		-		22,934,676
Residential mortgage-backed securities		-		14,273		-		14,273
Corporate bonds		-		103,742,503		-		103,742,503
Asset-backed securities		-		12,974,850		-		12,974,850
Exchange traded securities		-		485,600		-		485,600
Foreign bonds		-		28,034,554		-		28,034,554
Redeemable preferred securities		-		1,002,000		-		1,002,000
Total fixed maturity securities	$	-	$	213,049,532	$	-	$	213,049,532

Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	15,478,829	$	-	$	15,478,829

Equity securities
Mutual funds	$	-	$	47,808	$	-	$	47,808
Corporate common stock		219,290		5,174,462		75,811		5,469,563
Total equity securities	$	219,290	$	5,222,270	$	75,811	$	5,517,371

	December 31, 2024
Fixed maturity securities, available-for-sale
U.S. government and U.S. government agencies	$	-	$	4,275,965	$	-	$	4,275,965
States and political subdivisions		-		7,693,233		-		7,693,233
U.S. government agency mortgage backed securities		-		40,235,381		-		40,235,381
Commercial mortgage-backed securities		-		18,499,398		-		18,499,398
Residential mortgage-backed securities		-		14,111		-		14,111
Corporate bonds		-		99,356,554		-		99,356,554
Asset-backed securities		-		14,898,584		-		14,898,584
Exchange traded securities		-		496,800		-		496,800
Foreign bonds		-		27,239,795		-		27,239,795
Redeemable preferred securities		-		1,036,000		-		1,036,000
Total fixed maturity securities	$	-	$	213,745,821	$	-	$	213,745,821

Fixed maturity securities, available-for-sale held in trust under coinsurance agreement	$	-	$	17,932,297	$	-	$	17,932,297

Equity securities
Mutual funds	$	-	$	48,375	$	-	$	48,375
Corporate common stock		232,365		4,999,414		55,908		5,287,687
Total equity securities	$	232,365	$	5,047,789	$	55,908	$	5,336,062

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

3. Fair Value Measurements (continued)

As of June 30, 2025 and December 31, 2024, Level 3 financial instruments consisted of a private placement common stock that has no active trading and two joint venture investment with a mortgage loan originator.

This private placement common stock represents an investment in a small insurance holding company. The fair value for this security was determined through the use of unobservable assumptions about market participants. The Company has assumed a willing market participant would purchase the security for the same price as the Company paid until such time as this small insurance holding company commences significant operations. The joint venture investments with a mortgage loan originator are accounted for under the equity method of accounting.

Fair values for Level 1 and Level 2 assets for the Company’s fixed maturity available-for-sale and equity securities are primarily based on prices supplied by a third party investment service. The third party investment service provides quoted prices in the market which use observable inputs in developing such rates.

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

The Company’s equity securities are included in Level 1 and Level 2 and the private placement common stocks and joint venture investment are included in Level 3. Level 1 for the equity securities classified as such is appropriate since they trade on a daily basis, are based on quoted market prices in active markets and are based upon unadjusted prices. Level 2 for those equity securities classified as such is appropriate since they are not actively traded.

The Company’s fixed maturity available-for-sale securities and equity securities are highly liquid and allows for a high percentage of the portfolio to be priced through pricing services.

The change in the fair value of the Company’s Level 3 equity securities available-for-sale for the six months ended June 30, 2025 and December 31, 2024 is summarized as follows:

	(Unaudited)
	June 30, 2025			December 31, 2024

Beginning balance	$	55,908		$	65,240
Joint venture investment		50,000			-
Joint venture net income		37,577			106,039
Joint venture distribution		(67,674	)		(115,371	)
Ending balance	$	75,811		$	55,908

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

3. Fair Value Measurements (continued)

The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of June 30, 2025 and December 31, 2024, and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:

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

	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
	June 30, 2025 (Unaudited)
Financial assets
Mortgage loans on real estate
Commercial	$	17,963,830	$	18,672,289	$	-	$	-	$	18,672,289
Residential		231,327,847		254,177,198		-		-		254,177,198
Policy loans		4,708,650		4,708,650		-		-		4,708,650
Other long-term investments		54,583,080		59,200,715		-		-		59,200,715
Cash and cash equivalents		37,602,752		37,602,752		37,602,752		-		-
Accrued investment income		6,766,776		6,766,776		-		-		6,766,776
Total financial assets	$	352,952,935	$	381,128,380	$	37,602,752	$	-	$	343,525,628

Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial	$	10,471,682	$	10,471,682	$	-	$	-	$	10,471,682
Cash and cash equivalents		679,920		679,920		679,920		-		-
Total financial assets held in trust under coinsurance agreement	$	11,151,602	$	11,151,602	$	679,920	$	-	$	10,471,682

Policyholders' account balances	$	432,133,688	$	390,046,342	$	-	$	-	$	390,046,342
Policy claims		2,653,269		2,653,269		-		-		2,653,269
Total financial liabilities	$	434,786,957	$	392,699,611	$	-	$	-	$	392,699,611

	December 31, 2024
Financial assets
Mortgage loans on real estate
Commercial	$	14,314,107		$	14,724,122		$	-		$	-	$	14,724,122
Residential		195,050,397			211,590,742			-			-		211,590,742
Policy loans		4,367,534			4,367,534			-			-		4,367,534
Other long-term investments		58,223,514			63,062,063			-			-		63,062,063
Cash and cash equivalents		64,344,122			64,344,122			64,344,122			-		-
Accrued investment income		5,746,167			5,746,167			-			-		5,746,167
Total financial assets	$	342,045,841		$	363,834,750		$	64,344,122		$	-	$	299,490,628

Held in trust under coinsurance agreement
Mortgage loans on real estate
Commercial	$	12,660,117		$	12,660,117		$	-		$	-	$	12,660,117
Overdraft		(89,726	)		(89,726	)		(89,726	)		-		-
Total financial assets held in trust under coinsurance agreement	$	12,570,391		$	12,570,391		$	(89,726	)	$	-	$	12,660,117

Financial liabilities
Policyholders' account balances	$	431,190,092		$	365,288,900		$	-		$	-	$	365,288,900
Policy claims		2,478,465			2,478,465			-			-		2,478,465
Total financial liabilities	$	433,668,557		$	367,767,365		$	-		$	-	$	367,767,365

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

3. Fair Value Measurements (continued)

The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment was required to interpret market data to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.

The following methods and assumptions were used in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto:

Fixed Maturity and Equity Securities

The fair value of fixed maturity securities and equity securities are based on the principles previously discussed as Level 1, Level 2 and Level 3.

Mortgage Loans on Real Estate

The fair values for mortgage loans are estimated using discounted cash flow analyses. For both residential and commercial mortgage loans, the discount rate used was indexed to the Secured Overnight Financing Rate.

Cash and Cash Equivalents, Short-Term Investments, Accrued Investment Income and Policy Loans

The carrying value of these financial instruments approximates their fair values. Cash and cash equivalents and short-term investments are included in Level 1 of the fair value hierarchy due to their highly liquid nature.

Other Long-Term Investments

Other long-term investments are comprised of lottery prize receivables and fair value is derived by using a discounted cash flow approach. Projected cash flows are discounted using the average FTSE Pension Liability Index in effect at the end of each period.

Investment Contracts – Policyholders’ Account Balances

The fair value for liabilities under investment-type insurance contracts (accumulation annuities) is calculated using a discounted cash flow approach. Cash flows are projected using actuarial assumptions and discounted to the valuation date using risk-free rates adjusted for credit risk and the nonperformance risk of the liabilities.

The fair values for insurance contracts other than investment-type contracts are not required to be disclosed.

Policy Claims

The carrying amounts reported for these liabilities approximate their fair value.

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

4. Segment Data

The Company has a life insurance segment, consisting of the life insurance operations of TLIC, FBLIC and TAI, an annuity segment, consisting of the annuity operations of TLIC, FBLIC and TAI and a corporate segment. Results for the parent company and the operations of TMC, after elimination of intercompany amounts, are allocated to the corporate segment. These segments as of June 30, 2025 and December 31, 2024 and for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

	Three Months Ended June 30, (Unaudited)				Six Months Ended June 30, (Unaudited)
	2025		2024		2025		2024
Revenues:
Life insurance operations	$	13,374,112	$	12,282,831	$	25,640,281	$	24,133,009
Annuity operations		6,825,022		5,265,190		13,091,552		11,443,705
Corporate operations		2,182,518		595,109		3,259,514		1,108,624

Total	$	22,381,652	$	18,143,130	$	41,991,347	$	36,685,338

Income (loss) before income taxes:
Life insurance operations	$	1,500,901	$	1,039,421	$	1,923,272	$	2,927,650
Annuity operations		408,337		161,114		205,611		768,716
Corporate operations		1,316,982		587,807		1,825,272		369,578

Total	$	3,226,220	$	1,788,342	$	3,954,155	$	4,065,944

Depreciation and amortization expense:
Life insurance operations	$	2,331,018	$	2,262,786	$	4,383,040	$	4,286,093
Annuity operations		478,560		452,179		901,813		805,920

Total	$	2,809,578	$	2,714,965	$	5,284,853	$	5,092,013

	(Unaudited)
	June 30, 2025		December 31, 2024
Assets:
Life insurance operations	$	173,854,716	$	165,925,854
Annuity operations		506,726,207		506,980,782
Corporate operations		13,604,402		13,542,262
Total	$	694,185,325	$	686,448,898

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

4. Segment Data (continued)

The increases and decreases of revenues and profitability from our business segments for the three months ended June 30, 2025 and 2024 are summarized as follows:

	(Unaudited)
	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	683,317		$	-		$	-		$	683,317
Net investment income		311,674			1,287,177			(156,030	)		1,442,821
Net realized investment gains and loss on impairments		78,892			187,551			-			266,443
Service fees and other income		17,398			85,104			1,743,439			1,845,941
Total revenue		1,091,281			1,559,832			1,587,409			4,238,522

Benefits and claims
Increase in future policy benefits		(188,972	)		-			-			(188,972	)
Death benefits		507,351			-			-			507,351
Surrenders		168,700			-			-			168,700
Interest credited to policyholders		-			1,218,056			-			1,218,056
Dividend, endowment and supplementary life contract benefits		6,098			-			-			6,098
Total benefits and claims		493,177			1,218,056			-			1,711,233
Expenses
Policy acquisition costs deferred net of amortization		357,968			843,481			-			1,201,449
Amortization of value of insurance business acquired		653			655			-			1,308
Commissions		71,865			(924,978	)		-			(853,113	)
Other underwriting, insurance and acquisition expenses		(293,862	)		175,395			858,234			739,767
Total expenses		136,624			94,553			858,234			1,089,411
Total benefits, claims and expenses		629,801			1,312,609			858,234			2,800,644
Income before federal income taxes	$	461,480		$	247,223		$	729,175		$	1,437,878

The increases and decreases of revenues and profitability from our business segments for the six months ended June 30, 2025 and 2024 are summarized as follows:

	(Unaudited)
	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations			Total
Revenues
Premiums	$	1,191,388		$	-		$	-		$	1,191,388
Net investment income		180,459			1,192,621			(69,853	)		1,303,227
Net realized investment gains and loss on impairments		280,788			807,798			-			1,088,586
Service fees and other income		(145,363	)		(352,572	)		2,220,743			1,722,808
Total revenue		1,507,272			1,647,847			2,150,890			5,306,009

Benefits and claims
Increase in future policy benefits		726,887			-			-			726,887
Death benefits		961,591			-			-			961,591
Surrenders		366,910			-			-			366,910
Interest credited to policyholders		-			2,322,176			-			2,322,176
Dividend, endowment and supplementary life contract benefits		49,869			-			-			49,869
Total benefits and claims		2,105,257			2,322,176			-			4,427,433
Expenses
Policy acquisition costs deferred net of amortization		670,512			685,896			-			1,356,408
Amortization of value of insurance business acquired		(1,697	)		(1,696	)		-			(3,393	)
Commissions		(18,374	)		(916,623	)		-			(934,997	)
Other underwriting, insurance and acquisition expenses		(244,048	)		121,199			695,196			572,347
Total expenses		406,393			(111,224	)		695,196			990,365
Total benefits, claims and expenses		2,511,650			2,210,952			695,196			5,417,798
Income (loss) before federal income taxes (benefits)	$	(1,004,378	)	$	(563,105	)	$	1,455,694		$	(111,789	)

First Trinity Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2025

(Unaudited)

4. Segment Data (continued)

The Company conducts and manages its business through three reporting business segments. The two reporting segments representing the major lines of business, are: (1) Life Insurance Operations and (2) Annuity Operations. The third reporting business segment is Corporate Operations that represents the activities of the financial holding companies that own all consolidated subsidiaries and include excess assets that are invested primarily in mortgage loan activities. The Company allocates the impact of corporate-level transactions to all three reporting segments, consistent with the basis for management's evaluation of the results of those reporting segments.

The accounting policies of the reporting segments are the same as those described in Note 1 - Organization and Significant Accounting Policies. Business segment allocations are based on certain assumptions and estimates primarily related to asset and liability holdings and revenue and cost activity with methodologies applied consistently from year-to-year. Stated segment operating results would change if different methods were applied.

The Company’s Chief Executive Officer is the chief operating decision maker (CODM), responsible for reviewing financial performance and making decisions regarding the allocation of resources for the reporting segments. The Company measures and analyzes segment performance based on earnings focused on investment yield, mortality of life insurance operations, interest assumptions inherent in life insurance future policy benefits, policyholders’ balances interest crediting rates and relative ratios of commission to life insurance premiums and annuity deposits as presented in our consolidated statements of operations. FTFC believes that U.S. GAAP earnings before federal income taxes is an appropriate indicator of the profitability and underlying trends in our life insurance and annuity business. The CODM considers actual-to-budget variances in U.S. GAAP earnings on a quarterly basis when making decisions about allocating capital and personnel to segments and evaluating product pricing.

Disaggregated financial information for these segments, as regularly provided to the CODM, for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

	(Unaudited)
	Three Months Ended June 30, 2025
	Life Insurance			Annuity			Corporate
	Operations			Operations			Operations		Total
Revenues
Premiums	$	10,985,721		$	-		$	-	$	10,985,721
Net invesment income		2,317,562			6,609,583			184,093		9,111,238
Net realized investment losses		(1,398	)		(21,560	)		-		(22,958	)
Service fees and other income		72,227			236,999			1,998,425		2,307,651
Total revenue		13,374,112			6,825,022			2,182,518		22,381,652

Benefits and claims
Increase in future policy benefits		3,646,797			-			-		3,646,797
Death benefits		3,878,238			-			-		3,878,238
Surrenders		750,541			-			-		750,541
Interest credited to policyholders		-			4,818,377			-		4,818,377
Dividend, endowment and supplementary life contract benefits		101,740			-			-		101,740
Total benefits and claims		8,377,316			4,818,377			-		13,195,693
Expenses
Policy acquisition costs deferred net of amortization

First Trinity Financial CORP 10-Q