In January 2016, the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.
Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments
For the years ended December 31, 2017 and 2016, current income tax expense was $105,696 and $37,404, respectively. Deferred federal income tax expense (benefit) was $1,267,823 and ($208,361) for the years ended December 31, 2017 and 2016, respectively.
The $547,969 increase in short-term investments is due to management’s decision to increase our investment in funds that have a maturity of more than 90 days but less than one year at the date of purchase.
Our operations have been financed primarily through the private placement of equity securities and intrastate public stock offerings. Through December 31, 2017, we have received $27,119,480 from the sale of our shares.
Effective January 1, 2017, the Company entered into a revised advance agreement with one loan originator. As of December 31, 2017, the Company has outstanding advances to this loan originator totaling $4,925,259. The advances are secured by $6,375,214 of residential mortgage loans on real estate that are assigned to the Company. The Company has committed to fund up to an additional $574,741 to the loan originator that would result in additional security in the form of residential mortgage loans on real estate to be assigned to the Company. Effective January 1, 2017, the Company also entered into a revised escrow agreement with the same loan originator. According to the revised terms of the escrow agreement, as of December 31, 2017, $564,479 of additional and secured residential mortgage loan balances on real estate are held in escrow by the loan originator. As of December 31, 2017, $394,978 of that escrow amount is available to the Company as additional collateral on $4,925,259 of advances to the loan originator. The remaining December 31, 2017 escrow amount of $169,501 is available to the Company as additional collateral on its investment of $33,900,260 in residential mortgage loans on real estate.
FASB guidance requires the inclusion of unrealized gains or losses on available-for-sale securities, net of tax, as a component of other comprehensive income (loss). Unrealized gains and losses recognized in accumulated other comprehensive income (loss) that are later recognized in net income through a reclassification adjustment are identified on the specific identification method. In addition, deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (loss)” in the shareholders’ equity section of the statement of financial position.
During 2017, FBLIC utilized the remaining $55,409 net operating loss carry forwards generated in 2016 and existing as of January 1, 2017 to offset a portion of 2017 federal taxable income.
The jury concluded that Mr. Pettigrew, while still a member of the Company’s Board of Directors, did, in fact, make untrue statements regarding the Company and Mr. Zahn and committed breaches of his fiduciary duties to the Company and the jury awarded the Company $800,000 of damages against Mr. Pettigrew. In addition, the jury found that Mr. Pettigrew had defamed Mr. Zahn and intentionally inflicted emotional distress on Mr. Zahn and awarded Mr. Zahn $3,500,000 of damages against Mr. Pettigrew. In addition to the damages awarded by the jury, the Company and Mr. Zahn have initiated steps to aggressively communicate the correction of the untrue statements to outside parties.