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Note 13: Correction of Errors

3 Months Ended

Mar. 31, 2017

13) Correction of Errors

The accompanying Condensed Consolidated Financial Statements include the restatement of the Company’s previously filed condensed consolidated balance sheets for the quarter ended March 31, 2017 and year ended December 31, 2016 and the related condensed consolidated statements of operations, shareholders’ equity and cash flows for the quarters ended March 31, 2017 and March 31, 2016. For additional information about the correction of errors see Note 21 of the Company’s Annual Report on Form 10-K/A.

Subsequent to the issuance of the company’s 2016 Consolidated Financial Statements, the Company identified the following errors, (“Adjustments”):

Material Error in Accounting for Repurchase Agreements: The Company has concluded it should account for its Repurchase Agreements with unaffiliated banks as "On-Balance-Sheet" transactions, rather than as "Off-Balance-Sheet" as previously reported. Accordingly, the Company will reflect any outstanding loans as Loans Held for Sale and the corresponding debt as a Bank Loan Payable. The Company has corrected its sale accounting practice to defer revenue and costs on loans that remain as Held for Sale. The Company will recognize these deferred items at the time the loan is purchased by the ultimate investor.

Material Error in Accounting for Tax Valuation Allowance: The Company determined that it should have reversed its valuation allowance in its entirety in 2012 when the Company no longer qualified for the small life insurance company deduction, rather than in other periods as previously reported.

Other Immaterial Corrections and Reclassifications: In addition, the Company has recorded the following additional corrections in the accompanying Consolidated Financial Statements:

Reclassification of Receivables to Loans Held for Sale
Reclassification of the Provision for Loan Loss Reserve to net against Mortgage Fee Income
Correction to Future Life, Annuity and Other Benefits to reverse a deferred profit liability

The tables below present the impact of the restatement of the Company’s Condensed Consolidated Balance Sheets for the periods presented:

	As of March 31, 2017
	As Previously Reported	Adjustments	As Restated
Loans held for sale (formerly called Mortgage loans sold to investors)	$ 54,401,522	$ 97,489,906	$ 151,891,428
Receivables, net	15,736,045	(9,433,244)	6,302,801
Other assets	8,141,683	4,255,584	12,397,267
Total Assets	867,205,117	92,312,246	959,517,363
Future life, annuity, and other benefits	589,405,726	(1,156,778)	588,248,948
Bank and other loans payable	61,548,686	92,045,392	153,594,078
Income taxes	28,717,508	(3,347,481)	25,370,027
Total liabilities	737,292,214	87,544,133	824,836,347
Retained earnings	64,494,807	4,771,113	69,265,920
Total stockholders' equity	129,909,903	4,771,113	134,681,016
Total Liabilities and Stockholders' Equity	867,205,117	92,312,246	959,517,363

	As of December 31, 2016
	As Previously Reported	Adjustments	As Restated
Loans held for sale (formerly called Mortgage loans sold to investors)	$ 82,491,091	$ 106,648,741	$ 189,139,832
Receivables, net	18,870,119	$ (12,496,755)	6,373,364
Other assets	6,891,468	3,521,926	10,413,394
Total Assets	854,004,671	97,673,912	951,678,583
Future life, annuity, and other benefits	585,610,063	(1,542,371)	584,067,692
Bank and other loans payable	53,718,548	98,422,131	152,140,679
Income taxes	27,904,294	(3,585,425)	24,318,869
Total liabilities	725,825,117	93,294,335	819,119,452
Retained earnings	63,029,627	4,379,577	67,409,204
Total stockholders' equity	128,179,554	4,379,577	132,559,131
Total Liabilities and Stockholders' Equity	854,004,671	97,673,912	951,678,583

	As of January 1, 2016
	As Previously Reported«9KWA982V»	Adjustments	As Restated
Retained earnings	54,054,950	6,470,454	60,525,404

The tables below present the impact of the restatement on the Company’s Condensed Consolidated Statements of Earnings for the periods presented:

	Three Months Ended March 31, 2017
	As Previously Reported	Adjustments	As Restated
Mortgage fee income	$ 37,050,926	$ 1,376,928	$ 38,427,854
Total revenues	69,452,369	1,376,928	70,829,297
Increase in future policy benefits	5,182,449	385,593	5,568,042
Commissions	15,721,074	633,974	16,355,048
Provision for loan loss reserve	426,634	(426,634)	-
Cost related to funding mortgage loans	2,065,134	154,515	2,219,649
Total benefits and expenses	67,184,079	747,448	67,931,527
Earnings before income taxes	2,268,290	629,480	2,897,770
Income tax expense	(799,826)	(237,944)	(1,037,770)
Net earnings	1,468,464	391,536	1,860,000
Net earnings per common share (1)	$0.10	$0.03	$0.12
Net earnings per common share assuming dilution (1)	$0.09	$0.03	$0.12

	Three Months Ended March 31, 2016
	As Previously Reported	Adjustments	As Restated
Mortgage fee income	$ 39,110,967	$ 2,101,041	$ 41,212,008
Total revenues	67,355,307	2,101,041	69,456,348
Increase in future policy benefits	4,160,260	(38,559)	4,121,701
Commissions	16,842,270	2,368,698	19,210,968
Provision for loan loss reserve	586,778	(586,778)	-
Cost related to funding mortgage loans	2,154,397	478,357	2,632,754
Total benefits and expenses	63,163,550	2,221,718	65,385,268
Earnings before income taxes	4,191,757	(120,677)	4,071,080
Income tax expense	(1,580,220)	47,081	(1,533,139)
Net earnings	2,611,537	(73,596)	2,537,941
Net earnings per common share (1)	$0.18	($0.01)	$0.17
Net earnings per common share assuming dilution (1)	$0.17	($0.00)	$0.17

(1) Earnings per share amounts have been adjusted retroactively for the effect of annual stock dividends.

The tables below present the impact of the restatement on the Company’s Condensed Consolidated Statements of Comprehensive Income for the periods presented:

	Three Months Ended March 31, 2017
	As Previously Reported	Adjustments	As Restated
Net earnings	$ 1,468,464	$ 391,536	$ 1,860,000

	Three Months Ended March 31, 2016
	As Previously Reported	Adjustments	As Restated
Net earnings	$ 2,611,537	$ (73,596)	$ 2,537,941

The tables below present the impact of the restatement on the Company’s Condensed Consolidated Statements of Cash Flows for the periods presented:

	Three Months Ended March 31, 2017
	As Previously Reported	Adjustments	As Restated
Net cash provided by (used in) operating activities	$ 24,054,637	$ 6,376,739	$ 30,431,376
Net change in warehouse line borrowings	-	(6,376,739)	(6,376,739)
Net cash provided by financing activities	6,229,522	(6,376,739)	(147,217)

	Three Months Ended March 31, 2016
	As Previously Reported	Adjustments	As Restated
Net cash provided by (used in) operating activities	$ 25,863,034	$ 1,412,370	$ 27,275,404
Net change in warehouse line borrowings	-	(1,412,370)	(1,412,370)
Net cash provided by financing activities	(100,886)	(1,412,370)	(1,513,256)